China's economy expanded at its slowest rate in nearly three decades during the third quarter as it was hit by the long-running US trade war and cooling domestic demand, data showed on Friday, with an official warning of “mounting downward pressure”.
With China a key driver of global growth, the soft reading added to concerns about the world economy and prompted speculation that authorities will unveil fresh stimulus following a series of other measures in recent months.
Gross domestic product (GDP) expanded 6.0 per cent in July-September, from 6.2 per cent in the second quarter, according to the National Bureau of Statistics (NBS).
The reading – in line with an AFP survey of 13 analysts – is the worst quarterly figure since 1992 but within the government’s target range of 6.0-6.5 per cent for the whole year. The economy grew 6.6 per cent last year.
While NBS spokesman Mao Shengyong said the economy was showing stability, he warned: “We must be aware that given the complicated and severe economic conditions both at home and abroad, the slowing global economic growth, and increasing external instabilities and uncertainties, the economy is under mounting downward pressure.”
Services and high-tech manufacturing were the key areas of growth, while employment was “generally stable”, he added.
Propping up economy
Beijing has stepped up support for the economy with major tax cuts and measures making it easier for banks to increase lending, including a reduction in the amount of cash they must keep in reserve.
And on Wednesday the central People’s Bank of China said it would pump 200 billion yuan ($28 billion) into the financial system through its medium-term lending facility to banks to maintain liquidity.
But the efforts have not been enough to offset the blow from softening demand at home, which highlights the struggle leaders have in their drive to recalibrate the economy from one driven by exports and investment to one built on consumer spending.
The trade conflict and weak domestic demand prompted the International Monetary Fund to lower its 2019 growth forecast for China to 6.1 per cent from 6.2 per cent on Tuesday.
The figures are the latest to indicate a softening in the economy.
Last week, Beijing posted weaker-than-expected import and export figures for last month, after Washington imposed new tariffs in their long-running trade war.
And on Friday data showed industrial output rose 5.8 per cent, from 4.4 per cent in August, led by a surge in demand for solar panels and electric vehicles, according to the NBS.
But fixed-asset investment slid to 5.4 per cent year-on-year in January-September, from 5.5 per cent in January-August, as the government warned against risky borrowing to build roads and bridges that could artificially pump up GDP in the short run.
China’s army of consumers were starting to open their wallets again, with retail sales edging up 7.8 per cent year-on-year last month, compared with 7.5 per cent in August.
Figures last week showed activity in the crucial manufacturing sector continued to contract last month as a result of the trade spat.
The readings show an economy that is “struggling to generate demand on a domestic level”, said CMC Markets UK analyst Michael Hewson.
Infrastructure spending – a major pillar of growth – is also expected to decline as China tries to rein in toxic debt, said Julian Evans-Pritchard of Capital Economics.
The recent boom in property development is also “set to unwind”, he added.
“We expect monetary policy to be loosened before long in response, but it will take time for this to put a floor beneath economic growth,” Evans-Pritchard said in a note.