China Growth Cools Amid Trade Tensions 07/16 06:20
China's economic growth slowed in the quarter ending in June, adding to
challenges for Beijing as its tariff battle with Washington escalates.
BEIJING (AP) -- China's economic growth slowed in the quarter ending in
June, adding to challenges for Beijing as its tariff battle with Washington
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
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.
Growth was "generally stable" but "the uncertainties of the external
environment are mounting," said Mao Shengyong, a spokesman for the National
Bureau of Statistics.
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.
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.
More broadly, anxiety about tariffs "is already dampening business
confidence and delaying investment," said Louis Kuijs of Oxford Economics in a
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.
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.
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.
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
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
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.