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Irregular growth, increasing indebtedness and the escalation of the trade war with the United States are weighing more heavily on the Chinese economy.
The Chinese government reported Friday that the economy grew by 6.5% over the three months that ended in September compared to a year ago. Although fast by world standards, China's pace is the slowest since the beginning of 2009, in the depths of the global financial crisis.
China has published growth figures over the last two years that gave a picture of a struggling economy, despite lingering problems and widespread doubts about the reliability of official figures. A different story emerged this year, namely the economic slowdown that forces Beijing to make difficult choices.
Chinese buyers said they spend less and downgrade their purchases, such as staying at home rather than going out or drinking beer rather than cocktails. Salaries stagnate. Investments in infrastructure projects have fallen sharply.
The Chinese stock market is firmly in the red: it has fallen 30% since a peak in January, making it one of the worst in the world. The currency has weakened and is near the lowest level of the last ten years against the US dollar. Companies complain that they can not get money from lenders and a handful of them are in default.
All this before taking into account the intensification of the trade war between China and the United States. Friday's report is the first since the two countries started to impose equal tariffs as of early July.
So far, it has only slightly impacted the Chinese economy by $ 12 trillion. In recent weeks, the Chinese authorities have reported figures showing that trade remains robust despite the conflict.
On Friday, officials blamed "an extremely complicated and delicate international situation" for lower-than-expected growth figures, but also sought to boost confidence through statements of support from the central bank and credit regulators. market.
For China, the engine of growth is complicated
In times of economic downturn, China has turned to local governments to boost growth through major infrastructure and development projects. This approach has fueled growth, but has indebted key sectors of the economy.
The exact figures are not clear, but experts agree that the debt burden is considerable. In a report released this week, S & P Global has estimated that Chinese local governments have up to $ 6 trillion in shadow debt. That is roughly equivalent three fifths of China's total economic output. Analysts at the rating company have described it as "alarming level".
China has tried to reduce lending, but that has hurt growth. Growth in spending on highways, railways and public facilities has reached a record high this year. From the beginning of the year to the end of September, growth in infrastructure spending has declined at 3.3 percent compared to the same period last year, according to the National Bureau of Statistics.
Beijing now seems to rethink its austerity efforts. Officials start encourage new investments. To reduce the bill, they ask the private sector to lend a helping hand. This week, he announced that 1,222 infrastructure projects worth $ 362 billion would be funded by private companies.
The health of the Chinese consumer is critical
China's growing middle class and increasingly expensive consumption patterns are an important pillar of growth, as China ceases to depend on its dependence on exports and large-scale projects. 39; investment.
Retail sales remained buoyant, rising 9.2% in September over the previous year, as Chinese consumers continue to buy cars, home appliances, smartphones and smartphones. others products. The high figures will help officials in Beijing to argue that the trade war has left China's national economy largely intact.
But economists warn that the overall optimistic situation could change. For example, car sales began to slow in September, according to the China Passenger Car Association.
"In a month, it may be time for retailers to start selling," say China Beige Book International analysts. The group, which surveys large companies in China, said retailers have reported the worst pay situation in all sectors in recent months.
The detail numbers could also fall Beijing is attacking non-bank lenders and peer-to-peer lending platforms, which have been a source of credit for many consumers in recent years. Real estate development has also slowed down as fewer people buy new homes.
The trade war could be a brake
In September, the United States applied tariffs on goods worth $ 200 billion from China. President Trump gave no indication that he would return soon.
Chinese export figures for September jumped 14.5% from the previous year. This unlikely number is probably not a sign that trade is doing well. Some exporters attributed this increase to US firms that placed orders before new prices made their purchases more expensive.
"We know that customers have tried to send the most finished goods in transit to the US before the deadline," said Peter Levesque, General Manager of Modern Terminals in Hong Kong. This could happen again, while US importers are trying to bypass the next January 1 deadline for a 25% tariff on Chinese products.
While much of the impact of the trade war has not yet been felt, experts say it will not be long before the slowdown in the economy begins to be felt, especially when are struggling with other economic problems. According to a recent report by the International Monetary Fund, the trade war could lose 1.6% of China's economic growth next year.
"We will not be able to see it in the numbers provided and this will only add to the uncertainty," said Paul Gruenwald, world chief economist at S & P Global Ratings. "It will be difficult to identify any pressure because we do not have enough data."
But, he added, "there is definitely pessimism. It's just a question of how much it will slow things down. "
Officials seek to build confidence
Just before publishing economic growth figures on Friday morning, the websites of China's central bank, insurance agencies and securities regulators published interviews with senior officials who were supporting the market. . The president of the securities regulator has gone so far as to appeal to some market players to buy shares.
"We encourage private equity funds to buy shares of listed companies and to participate in mergers and acquisitions of listed companies," said Liu Shiyu, chairman of the Securities Regulatory Commission of China.
Earlier this month, the People's Bank of China mobilized financial leverage that effectively inflated 175 billion dollars in the economy and the market.
– Cao Li contributed to the research.
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