China’s second quarter GDP growth slows to the weakest in 27 years, at 6.2%

China’s second quarter economic numbers are a step down in momentum and raises the bar on expectations for government stimulus to prop the economy up in the months ahead to boost consumption and restore business confidence.

China flag Source: Bloomberg

China’s economic growth for the second quarter slowed to 6.2% from the previous quarter’s 6.4% growth and from a year ago, marking the weakest pace of growth in 27 years as domestic and external demand eased. This is as the country continues to tackle the trade negotiations with the largest economy in the world, the United States (US).

China’s second quarter economic numbers are a step down in momentum and raises the bar on expectations for government stimulus to prop the economy up in the months ahead to boost consumption and restore business confidence.

Even though the numbers are weak in its pace of growth compared to other quarters, it was still within expectations as analysts in a Reuters poll had forecast for Gross Domestic Product (GDP) for the second quarter to come in at 6.2%.

The gross domestic product (GDP) results are a reflection of government policies to aid the weakened growth as the country continues to be entangled in a trade conflict with the US which escalated late last year.

China has been boosting its own economy through government stimulus measures, including tax cuts worth close to 2 trillion yuan (US$291 billion).

Better industrial output, retail sales numbers

For the month of June, industrial output gained 6.3% from a year earlier, showed data from the National Bureau of Statistics, which was a pick-up from May’s 17-year low of 5.0%.

Retail sales for June bumped up 9.8%, rising the fastest pace since March of last year, led by a surge in car sales which rose by 17.2%. Street expectations were predicting for a pullback of 8.3%.

However, the improvement in car sales for the month could be due to the discounts offered by car dealers to customers to reduce on the high inventories brought about the changing emission standards, suggest experts.

Motor vehicle production numbers, which fell for the 11th straight month, had fallen by 15.2% in the first five months of 2019.

Meanwhile, fixed asset investment for the first half of the year rose by 5.8% from a year earlier, compared with a 5.6% increase for the first five months of this year. Experts were predicting for an increase of 5.5% for the six months.

Policy measures are working

‘Policies in place since the start of the year, including the boost to infrastructure investment, appear to have been effective in helping to shore up the results,’ said IG market strategist Pan Jingyi.

However, Ms Pan noted that the longer-term outlook remains ‘one that is uncertain’ as global growth is expected to slow down, thus putting a drag on demand. ‘(Also), the resumption of the US-China trade continues to confound the markets in terms of a timeline,’ she added.

China’s GDP for 2019 expected to remain within 6-6.5% range

China’s finance minister Liu Kun said at a conference last week that the Chinese government has confidence for its annual economic growth to remain within the 6-6.5% range.

The minister however, left out mentioning the trade negotiations between the US and China in his speech.

Early this month, markets in Asia rallied following a ceasefire on the tariff war between the two countries. China president Xi Jinping and US president Donald Trump had agreed on resuming the trade talks at the G20 summit after a seven-week stalemate.

Read more on China’s Q2 GDP slowing slowly


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