Wednesday, 21 August, 2019

China's Economic Growth Cools Further

Workers are seen at a production line manufacturing tires at a factory in Nantong Jiangsu province China Workers are seen at a production line manufacturing tires at a factory in Nantong Jiangsu province China
Ginger Lawrence | 15 July, 2019, 10:29

China's economic growth slowed to 6.2% in the second quarter, its weakest pace in at least 27 years, as demand at home and overseas faltered in the face of mounting U.S. trade pressure.

The slowing economy makes it more hard for President Xi Jinping to fight back forcefully against Washington - which is using tariffs as leverage to try to force Beijing into opening up its economy.

Growth in retail sales slowed to 8.4% in the first half of 2019, down 0.1 percentage points from the first quarter, the government reported.

"Global growth has slowed and external uncertainties are on the rise".

"The economy is under new downward pressure". -China trade war would continue to cloud the economic outlook. Mao told journalists: "There is still much room for policy manoeuvering".

China has already slashed RRR six times since early 2018 to free up more funds for lending and analysts polled by Reuters forecast two more cuts this quarter and next.

With this year marking the 70th anniversary of the People's Republic of China founding, politics necessitates healthy growth, said Raymond Yeung of ANZ bank.

Cutting banks' reserve requirement ratios (RRR) "is still very likely as the authorities want to support the real economy in a long run", he said, predicting the economy would continue to slow before stabilising around mid-2020.

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The month of June held bright spots for the economy.

Value-added industrial output, which measures production at factories, mines and utilities, rose 6.3% year-on-year in June, up from 5% growth in the previous month.

The latest Chinese economic weakness appears to be driven by construction and industry, according to Julian Evans-Pritchard of Capital Economics.

For the manufacturing sector, investment accelerated a notch to 3% in the first half, while infrastructure investment also picked up to 4.1%.

In some provincial cities, including Nanjing and Hangzhou, local regulators have guided banks to raise interest rates on home loans in June, Chinese media have reported.

Meanwhile, extreme weather and highly contagious African swine fever have sent food prices skyrocketing, especially for meat, with the size of the world's largest pig herd down 15 percent in the first half of the year. "As trade negotiations struggle for meaningful progress, we are probably not near the bottom for China's economy".

The world's second largest economy has also been fighting a trade war with the United States which has weighed on global trade.