China has been hit by a double whammy “at home and abroad” as GDP growth in the third quarter slowed to 6%, the lowest rate in nearly three decades.
Data released on Friday by the National Bureau of Statistics dropped to levels not seen since 1992. But the figure was still within Beijing’s target range of between 6% and 6.5% for 2019.
Last year, the world’s second-largest economy expanded by 6.8% but trade war turmoil with the United States and slowing domestic demand has taken its toll.
“[China] was faced with mounting risks and challenges both at home and abroad,” Mao Shengyong, a spokesman for the National Bureau of Statistics, said at a media briefing. “[But] the national economy maintained overall stability … and improved living standard.”
Beijing as been embroiled in a 15-month trade dispute with Washington amid cooling domestic demand and a swine fever outbreak in the country’s pig herd that has sent meat prices soaring and inflation spiraling.
More than one million hogs have been culled in the past 12 months, according to official reports. But analysts believe the real figure could be double that.
“Looking ahead, consumer price inflation should continue to accelerate in the coming months as supply disruptions continue to push up pork prices and as the drag from lower oil prices eases,” Martin Lynge Rasmussen, of Capital Economics, said in a note.
To give the economy a shot in the arm, Beijing has pushed forward a raft of stimulus measures. These included higher tax reimbursement rates for exporters dealing with US tariffs, boosting bank lending and increasing spending on major infrastructure projects such as roads and high-speed rail networks.
“The trade conflict with the US remains a wild card,” Tommy Wu, of Oxford analytics, said. “Elevated US-China tension will continue to weigh on the external outlook, despite the delay of additional US tariff imposition on a range of consumer goods.
“And we think that a [substantial] US-China trade deal remains unlikely any time soon [despite a planned phase-one agreement],” he added.
Policymakers are now likely to take further action to kickstart the economy.
Earlier this week, Premier Li Keqiang told provincial governors that the country should step up efforts to enhance the economy’s resilience, address downward pressure and increase employment.
Looser credit tipped
“We predict the People’s Bank of China is likely to loosen credit conditions further, which might involve lower policy interest rates,” Xu Xiaochun, an economist at Moody’s, said.
“Any further loosening, however, will be tempered by the ongoing need to keep debt risks in check following previous excesses,” he continued.
“But ensuring demand does not dip too far in the short run is a more imminent priority, whereas the danger of elevated debt is a more distant problem,” Xu added.
Amid the gloom, President Xi Jinping is likely to sign off on a ‘mini trade deal’ when he meets US President Donald Trump at the APEC Forum in Chile next month.
China is still calling for more talks to hammer out the details. But the agreement should be ready in time for the Santiago summit in early November.
Speaking to media at the White House this week, Trump said the partial deal announced was in the process of being formalized. “It’s being papered,” he said.
For China’s economy, a trade war truce can not come quick enough.
“A limited agreement will not resolve the underlying areas of disagreement between the two sides as long-term divergence in US and China national interest remains across trade, technology, investment and geopolitics,” Michael Taylor, a managing director for Moody’s Investors Service, said.
“We expect further rounds of negotiation to remain challenging, with further potential for financial markets volatility.”
– additional reporting by AFP