China's second-quarter GDP growth is expected to slow to 6.2 percent, the lowest level in 27 years, as trade war breaks out

BEIJING (Reuters) – China is expected to announce on Monday that economic growth has slowed at its weakest pace in at least 27 years in the second quarter, reinforcing the need for economic stimulus while a war is over. commercial killing continues with the United States.

Policymakers are likely to strengthen support measures to prevent massive job losses that could pose a threat to social stability, but analysts say the room for aggressive stimulus is limited by the fear of Increase leverage levels and already high structural risks.

"The sluggishness that weighs on the Chinese economy may not disappear quickly due to difficulties on the domestic front and outside," said ANZ analysts in a note.

Analysts polled by Reuters expect China to report a 6.2% rise in gross domestic product (GDP) in April-June over the previous year, its slowest pace since the first quarter of 1992 and the first quarterly data ever recorded.

This would be another drop from 6.4% in the previous quarter, which could push the year's economic growth to a low of almost 6.2%, the lowest in the last 30 years.

The government has focused more on fiscal stimulus measures to support growth this year, announcing massive tax cuts of nearly 2 trillion yuan ($ 291 billion) and a quota of 2.15 billion yuan for the issuance of special bonds by local governments to stimulate the construction of infrastructure.

But the economy has been slow to react and business confidence remains fragile, weighing on investment. Investors fear that a longer and more costly trade war between the world's two largest economies could trigger a global recession.

The government will release Monday (02:00 GMT) the data of the second quarter GDP, as well as the June activity data, which could indicate a persistent weakness.

Data released on Friday showed that exports fell in June after the United States increased tariffs on Chinese products sharply, while imports fell more than expected, highlighting the weakness of imports. domestic demand. Data on loans and bank credits were largely solid.

A recent official factory gauge for June has shown that Chinese manufacturers are releasing as fast as possible since the global financial crisis of ten years ago.

Will the PBOC follow FED?

Prime Minister Li Keqiang said this month that China would

the timely use of reductions in the reserve requirement ratio and other financing tools to help small businesses, while reiterating the wish not to resort to "flood-like" stimulus measures.

Investors are eagerly waiting to hear whether the People's Bank of China (PBOC) will follow the US Federal Reserve in easing its policy.

Federal Reserve Chairman Jerome Powell again said on Thursday that a reduction in the US central bank's interest rate was likely at its next meeting later this month, as companies cutting back investments due to trade disputes and slowing global growth.

Most analysts believe that the PBOC is most likely to lower its newly-developed market-based interest rates, or continue to reduce the RRR, especially for smaller banks, if it chooses to follow the Fed.

Economists in the latest Reuters poll are forecasting two more cuts of 50 basis points from the RRR this quarter and the fourth.

quarter, but did not expect the PBOC to reduce its benchmark lending rate, as it did in previous recessions.

ANZ expects the central bank to reduce the 5-basis point PST and the RRR 7-day repo rate by 100 basis points over the rest of the year.

The PBOC has reduced the amount of cash that banks must hold in reserve six times since early 2018 to stimulate credit growth. He also quietly guided the drop in short-term rates.

China does not need "big" stimulus measures unless the trade war worsens, said a central bank advisor earlier this month.

The leaders of the United States and China agreed in late June to try to put the trade talks back on track after talks broke down in May, and Washington said it would delay new tariffs.

But existing taxes imposed by both parties remain in place, weighing on profits and supply chains, and both sides remain at odds over the important issues needed for an agreement.

GRAPHIC – Economic Trends of China: tmsnrt.rs/2iO9Q6a