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BEIJING (Reuters) – China's economy expanded at a slower pace in the second quarter as Beijing's efforts to contain debt hurt activity, while the firm's output was weakening Trade war with the United States intensified.
The world's second-largest economy grew up to 6.9% in the last year-on-year to meet the official 2018 growth target of around 6.5 percent, though the trade row with Washington, has slowing down the market.
"We expect growth in H2 to be challenged by the slow credit growth and real estate activity. Also, the intensifying trade with the U.S. will start to weigh on growth, "Louis Kuijs, Head of Asia Economics for Oxford Economics in Hong Kong, wrote in a note.
The second quarter GDP figure was slightly lower than the first quarter 6.8 percent, the National Bureau of Statistics said on Monday, with net exports to overall economic growth.
As the trade shows with Washington shows no signs of ebbing and the external sector continues to weigh in on China's economy, said more growth was slowing at a faster pace in the second half of the year.
First-half fixed asset growth growth was a record low, while industrial output for June matched the slowest growth rate in over two years.
The data weighed on Asian markets, adding to concerns about the impact of Sino-U.S. trade war on the global economy and China. The Shanghai Composite index .SSEC and the blue-chip CSI300 .CSI300, the world's worst-performing major indexes this year, each fell over 0.6 percent. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.4 percent.
We have a quarterly basis, growth picked up 1.8 percent from 1.4 percent in the first quarter, beating expectations of 1.6 percent growth, mainly supported by domestic consumption.
While manufacturing output growth slowed overall, China's steel mills fell in record numbers in the construction industry as a whole.
For a graphic on China and GDP, click tmsnrt.rs/2qCAdBt
SLOWDOWN RISKS, GOVT SUPPORT
China's economy has already felt the pinch of a multi-year crackdown on riskier lending that has driven up corporate borrowing costs, prompting the bank.
Data on Friday brought to the fore, if analysts suggest the front-loading of shipments ahead of tariffs.
The administration of US President Donald Trump has raised the stakes in its trade row with China, saying it would slap 10 percent tariffs on an extra $ 200 billion worth of Chinese imports. That threat was only $ 34 billion worth of each other's goods.
The property market, one of the economy's key drivers, also slowed growth, its weakest growth in six months in June, with sales also cooling.
Faced with a slowdown in domestic demand and the trade war risks, Chinese policymakers have started to step up support for the economy and have softened their stance on deleveraging.
Some analysts are calling for even stronger measures.
"If the situation is worse than what we expect I do think," said Iris Pang, Greater China Economist at ING in Hong Kong.
Statistics Bureau spokesman Mao Shengyong told reporters on Monday that he expects more infrastructure projects to be launched after the government completes his inspections on local government debt.
But a sustained rebound in infrastructure could point to some backtracking on deleveraging, especially if the country's debt challenge.
Fixed asset investment in infrastructure grew in the first half of the year, compared to 21.1 percent in the first half of 2017.
CONSUMERS TO THE RESCUE?
China is looking at consumer spending in the economy as it moves away from government-driven investment and the export sector, but the evidence suggests that.
Final consumption contributed 78.5 percent of first half growth, compared to 63.4 percent in the same period last year, and higher even than in the first quarter, when spending typically peaks due to the influence of the Chinese New Year holiday.
But that data also includes spending and being a negative factor as they have been this year.
Retail sales growth picked up in June, but year-to-date growth is down to 9.4 percent from 10.4 percent in the first half of last year. The surveyed jobless rate in June was unchanged from May at 4.8 percent.
While economists are about blood in China's growth trajectory, many are wary of the risks to the escalating trade dispute with the United States.
"Uncertainty about the scale and composition of U.S. tariffs on China's exports is already dampening business confidence and delaying investment, especially cross-border investment," Oxford Economics' Kuijs said.
"If the US and China do not resume talks in the next two months or so, the conflict will escalate further, with major economic implications for themselves and the global economy."
Graphic: tmsnrt.rs/2lQ48De [19659033] Reporting by Kevin Yao and Cheng Fang; Additional reporting by Stella Qiu; Writing by Elias Glenn; Editing by Shri Navaratnam
