China’s economy decelerated to its slowest growth rate in 27 years, partly due to a slump in exports, as Beijing and Washington remain locked in a trade war that has no end in sight.
The data published Monday will likely bolster President Donald Trump’s belief that his Chinese counterpart, Xi Jinping, is under pressure to strike a trade deal to shore up the world’s second-largest economy.
“The trade war is having a huge impact on the Chinese economy,” Edward Moya, a market analyst at currency-trading firm Oanda, wrote in a research note. “As trade negotiations struggle for meaningful progress, we are probably not near the bottom for China’s economy.”
Official figures from the National Bureau of Statistics – which economists tend to take with a grain of salt, viewing them as likely too rosy – showed that the annual growth rate slowed to 6.2% in the three months to the end of June, down from 6.4% the previous quarter.
This is within the 6% to 6.5% band the government has set for this year and was in line with market expectations of a gradual slowdown. Still, it is China’s lowest growth rate since records began in March 1992.
Analysts said that the slowing momentum would make it more difficult for the government to hit its target of doubling the size of the economy between 2010 and next year.
Mao Shengyong, a spokesman for the National Bureau of Statistics, characterized the economy as operating “in a reasonable range” and said it was continuing on a “stable, steady and progressive development trend.”
“However, we must also see that the current domestic and international economic situation is still complicated and severe, global economic growth has slowed down, external instability and uncertainties have increased,” Mao told reporters Monday. “The economy is facing new downward pressure.”
China’s export figures were particularly bad, contracting 1.3% in the three months to the end of June compared with a year earlier. Shipments of suitcases, plastics, furniture, footwear and textiles were the worst affected, economists at UBS wrote in a research note.
But exports to the U.S. fell by another 8.2% in the latest three months, particularly after tariffs on $200 billion worth of Chinese exports to the U.S. rose from 10% to 25% in May. American data had previously shown the amount of Chinese products on all tariff lists being shipped to the United States had declined by a further 33% in May, the UBS economists noted.
But the trade war is also affecting the United States. Customs data from Beijing published Friday showed that Chinese imports of American goods fell 31.4% in May compared with a year earlier, widening China’s trade surplus with the United States.
Trump and Xi agreed at a meeting in Japan in June to reopen talks on a trade deal, with the American president agreeing to hold off on imposing additional tariffs on Chinese goods for the meantime.
But analysts say there is little sign of progress on the key issues, including China’s support for state-owned enterprises and its practice of forcing foreign investors to hand over technology as the price for entering the huge Chinese market.
“Uncertainty caused by the US-China trade war was an important factor, and we think this will persist, despite the recent tariff truce,” said Tom Rafferty, a China expert at the Economist Intelligence Unit. “Businesses remain skeptical that the two countries will reach a broader trade agreement and recognize that trade tensions may escalate again.”
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