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BEIJING (AP) – Chinese growth has slowed at its slowest pace for nearly three decades, officials said Monday as trade tensions with the United States and lingering financial problems weigh more and more heavily on the economy. One of the most vital economic engines in the world.
Chinese officials said the economy grew by 6.2 percent between April and June over the previous year. Although this economic growth is the envy of most of the world, it represents the slowest pace in China since the beginning of modern quarterly registers in 1992. This marks a marked slowdown from the beginning of the 1990s. this year, when growth reached 6.4%, which is the lowest level in 27 years reached during the global financial crisis a decade ago.
Prime Minister Li Keqiang has set a goal for March economic growth of between 6 and 6.5% this year. Monday's numbers were in this range.
But most of the growth in the quarter may have been in April and early May, when public confidence was higher due to a March tax cut and heavy spending in March. infrastructure in early spring. Trade negotiations broke down on May 10 and President Trump sharply increased tariffs on Chinese products, a move that undermined consumer confidence in China. Growth would also have occurred at the beginning of the quarter before the government's takeover at the end of May undermined financial confidence.
The Chinese authorities acknowledged Monday that conditions were becoming increasingly difficult.
"Economic conditions are still difficult at home and abroad, global economic growth is slowing, external instabilities and uncertainties are increasing, unbalanced and inadequate development at home is still acute, and the economy is undergoing a crisis. new downward pressure, "said Mao Shengyong, spokesman for the National Bureau of Statistics of China, at a press conference.
Mao downplayed the effects of trade, saying China's economy was increasingly reliant on consumption.
Monthly economic data, particularly for imports, suggest that the second quarter started strong but then slowed down. "The activity has certainly progressed until April," said George Magnus, longtime specialist of the Chinese economy currently at Oxford University. "Something happened in May."
The number may also underestimate the magnitude of the slowdown. Economists largely doubt the veracity of China's overall growth figure, which shows much more stability than comparable figures in the United States and elsewhere.
Some sectors of the Chinese economy are doing pretty well. The strongest sector appears to be the construction of infrastructure, largely financed by borrowings from local, provincial and national government agencies. Retail sales also grew.
The main drag on the Chinese economy is trade, which has experienced strong growth over the last three decades but has steadily declined in recent months. Exports fell 1.3% in June from a year earlier, the government said Friday, and imports dropped 7.3%.
While the trade war has hurt US purchases from China, economic weakness in Europe and many Asian countries has resulted in a much weaker overseas demand than in the United States. Last week, Singapore unexpectedly announced that its trade-dependent economy contracted by an annualized 3.4% in the second quarter.
"The economy is clearly slowing as the global economy slows, so exports are slowing down," said Larry Hu, chief economist for China at Macquarie Capital, the bank's unit. Investment from a large Australian multinational.
China's problems originate not only in trade, but also in a heavily indebted financial system that has been shaken by a series of major shocks in recent weeks.
On May 24, Chinese financial regulators bought Baoshang Bank in Inner Mongolia, a small institution that is part of a previously controlled financial empire. Xiao Jianhua, a financier who disappeared in the custody of government investigators two years ago. Regulators have tried to force some of its major creditors to accept losses rather than bail them out in order to teach financiers to pay more attention to the way they place money from their institutions.
The problems in some of the darker recesses of the Chinese financial system have also scared investors. China's shadow banking system plays an important role in financing real estate projects and other private enterprises. However, managers of some riskier investment products have struggled to make high interest payments to investors in recent weeks. In some cases, they also struggled to repay their principal.
These incidents have triggered a wider movement in recent weeks away from riskier investments. Institutions and households invest in larger and more stable financial institutions, managed by the central government.
Large state-controlled banks have channeled the bulk of their loans to state-owned enterprises. This long-standing trend has hurt the real estate market and the private sector in general.
Regulators have repeatedly urged major banks to lend more to small businesses and the private sector, and Prime Minister Li, did it again on July 2nd. But these exhortations have so far had a limited effect. Bank credit officers fear being blamed or even being investigated for bribery if they make large loans to distressed private companies that subsequently fail, as the economy grows. # 39; weakens.
Andrew Collier, managing director and founder of Orient Capital Research, a Hong Kong-based investment and economic research firm, said the unrest in Baoshang and the shadow banking system had shaken financial markets but seemed have been mastered, at least until now.
"The Chinese central bank is watching carefully and, for now, it will use discrete means to avoid capricious financial turmoil," he said.
Economists are waiting for other warning signs, such as inflation. Price increases have been controlled, according to official statistics. But many in China complain that the cost of living is rising rapidly, especially for food, but also for rent and other daily expenses.
Industrial production weakened this year, as did private sector investment. Home sales have slowed, as buyers are increasingly looking for bargains, but sellers are reluctant to lower prices. The car factories have production fell sharply due to weak sales, but last month there were signs that consumer interest in buying luxury automobiles could finally stabilize.
The long-running trade war has led many multinational corporations to look for ways to move supply chains elsewhere. But many continue to invest in China to supply its Chinese market as well as others, particularly in Asia.
"The Chinese government will continue its efforts to create a more stable, fairer, more transparent and predictable investment environment," said Gao Feng, spokesman for the Ministry of Commerce, at a meeting point. press Thursday.
He added that "China has not experienced massive withdrawals of foreign capital."
For now, however, the economy continues to function to a large extent because the Chinese government is injecting huge sums of money into infrastructure. It builds high-speed railway lines, huge road bridges, harbors and other facilities to connect smaller and less affluent towns and villages to the rest of the country.
This infrastructure facilitates business and travel, even in some of the poorest and most remote areas of China. Bankers and economists worry, however, whether some of these investments will ever generate sufficient returns to cover their costs.
"There is a very weak commercial base," said Magnus, "for this credit-driven infrastructure spending."
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