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16 July 2018
 |
| China
(The Total Investment & Insurance Solutions) |
China's economic growth slowed in the quarter ending in June, adding to
challenges for Beijing as its tariff battle with Washington escalates.
The world's second-largest economy expanded by 6.7 percent over a year
earlier, down from the previous quarter's 6.8 percent, the government reported
Monday.
Key drivers of growth including spending on construction and other
investments were weakening even before the dispute with Washington erupted.
Forecasters have expected a slowdown since Beijing tightened lending controls
last year to rein in surging debt. The
Total Investment & Insurance Solutions
Growth was "generally stable" but "the uncertainties of
the external environment are mounting," said Mao Shengyong, a spokesman
for the National Bureau of Statistics. The
Total Investment & Insurance Solutions
Chinese leaders have expressed confidence their $12 trillion-a-year
economy can survive the tariff war with U.S. President Donald Trump. Beijing is
resisting American pressure to change industrial policies Washington says are
based on stealing or pressuring foreign companies to hand over technology and
might threaten U.S. industrial leadership.
But forecasters said the downturn is likely to deepen as Beijing
tightens financial controls and trade tensions worsen.
"There are risks that Chinese growth will slow more abruptly,"
Citigroup economists said in a report. The
Total Investment & Insurance Solutions
Washington imposed an additional 25 percent tariff on $34 billion of
Chinese goods on July 6. Beijing retaliated with similar penalties on the same
amount of U.S. imports. Washington fired back last week with a threat of 10
percent tariffs on an additional $200 billion list of goods.
Trade contributes less to China's economic growth than it did a decade
ago but still supports millions of jobs. Even though Trump's first tariff hike
didn't take effect the current quarter, exporters say American orders started
to fall off as early as April. The
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More broadly, anxiety about tariffs "is already dampening business
confidence and delaying investment," said Louis Kuijs of Oxford Economics
in a report.
Unless the two sides restart negotiations, "the conflict will
escalate further, with major economic implications for themselves and the
global economy," said Kuijs.
Of greater concern than trade is "slowing domestic demand within
China's economy," said Tom Rafferty of the Economist Intelligence Unit in
a report.
China is the No. 1 trading partner for its Asian neighbors and buys oil,
iron ore and other raw materials from Australia, Brazil and elsewhere. Chinese
consumers are an increasingly important market for food, clothes, electronics
and other goods. The Total Investment
& Insurance Solutions
Investment in factories, housing and other fixed assets decelerated in
the latest quarter. It rose by 6 percent in the first half, down 1.5 percentage
points from the first quarter. The
Total Investment & Insurance Solutions
Chinese leaders are in the midst of a marathon effort to encourage
self-sustaining growth driven by domestic consumption and reduce reliance on
exports and investment. The Total
Investment & Insurance Solutions
Beijing has responded to previous downturns by flooding the
state-dominated economy with credit. But that has swelled debt, prompting
concerns about risks to the banking system. The ruling Communist Party has made
controlling financial risks a priority this year, suggesting it will resist
easing lending controls. The Total
Investment & Insurance Solutions
Consumer spending has risen more slowly than planned, leaving economic
growth dependent on debt-supported investment.
Retail spending in June rose by 9 percent over a year earlier, a
half-percentage point higher than in May. The increase was driven by rapid
growth in the sales of higher-end consumer goods such as cosmetics and
audio-video equipment.
Forecasters say if threatened tariff hikes by both sides are fully
carried out, that could cut China's 2019 growth by up to 0.3 percentage points.
Mao, the statistics bureau spokesman, declined to say how much the
dispute might hurt Chinese economic growth.
"But generally speaking, trade frictions unilaterally started by
U.S. will have an impact on the economy of both countries," Mao said.The Total Investment & Insurance
Solutions
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