China Economic Growth at its Slowest since 2009

China’s economic growth slowed more than expected since the global financial crisis in 2009 as the country’s worsening trade war with the US weighs on expansion.

Official data from the National Bureau of Statistics (NBS) released on Friday showed the world’s second-largest economy grew 6.5 percent year-over-year in the third quarter of this year, missing analysts’ expectations for a 6.6 percent expansion.

Gross domestic product (GDP) reading also came in lower than the 6.7 percent year-over-year growth in the previous quarter.

On a quarter-on-quarter basis, China’s economy slowed down to 1.6 percent from a revised 1.7 percent in the second quarter, meeting expectations.

The sluggish third quarter growth came as factory output experienced its weakest performance since February 2016 in September as auto manufacturers slashed production by over 10 percent amid a sales slowdown.

Senior China Economist Betty Wang stated that the 6.5 percent figure is definitely below their consensus expectations with weakness largely coming from the secondary industry – most notably manufacturing, adding that they might review their fourth-quarter forecasts.

Recent economic data have indicated weakening in domestic demand with softness across factory activity to infrastructure investment and consumer spending, as a multi-year crackdown on riskier lending and debt has increased companies' borrowing costs.

Importantly, second quarter sequential expansion was lowered from 1.8 percent, suggesting the economy’s growth rate in the second half was less than what several analysts had estimated.    

Senior emerging markets economist Kota Hirayama said the trend of slowdown is strengthening despite Chinese authorities’ pledge to encourage domestic investment to support the economy, adding that domestic demand turned out weaker than unexpectedly solid exports.

The Chinese economy has slowed this year following government efforts to reduce high levels of debt. US tariffs on more than $250 billion of its exports has also started to put pressure on its growth.

In an effort to boost expansion, Chinese officials have resort to tax cuts, infrastructure spending and looser monetary policy.

People's Bank of China (PBOC) Governor Yi Gang and senior regulators has pledged targeted measures to help firms’ financing problems and encourage commercial banks to increase lending to private businesses.

The slowdown in the country’s growth is not surprising, according to regional chief investment officer Kelvin Tay.

China cannot be growing at 6.6 percent to 6.7 percent each quarter due to the fact that they are beginning to deleverage and also for the fact that there is a trade dispute going on with the US, he stated.

Despite the slowdown, China still seems to be on track to meet the government’s 2018 growth target of 6.5 percent, although the deepening trade spat with the US is likely to further weigh on the country in the coming quarters.

By the end of the year, US President Donald Trump’s administration is set to lift tariffs on $200 billion of Chinese products from 10 percent to 25 percent. Trump has also said he is prepared to raise the tariffs further to include all Chinese exports to the US, which topped $500 billion in 2017.

HQBroker is here to give you a daily news roundup about the forex, commodities, technologies, automobiles, and economies. You can open an account now and make yourself updated with essential news in the market. Share your thoughts and experiences with us by commenting your HQBroker reviews.