Published: Sat, October 19, 2019
Markets | By Otis Pena

China’s downward economic path offers no escape from its trade problems

China’s downward economic path offers no escape from its trade problems

China's economic growth slowed more than expected in the third-quarter, signalling trouble for the global economy that's teetering on the brink of another recession after the 2009 meltdown.

Reuters citing China's statistics bureau reported the world's second largest economy grew 6.0 percent on-year in the July-September period, after expanding 6.2 percent in the second quarter and 6.4 percent in the first quarter.

But fixed-asset investment slid to 5.4 percent on-year in January-September, from 5.5 percent 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. "The protracted U.S. -China dispute, which now goes well beyond just trade, has hit the sentiment badly".

He said more intervention by policymakers to support the economy was likely "but it will take time for this to put a floor beneath economic growth".

-With assistance from Kevin Hamlin.

Still, the slowdown will not necessarily compel decision makers in Beijing to reach an agreement with President Donald Trump since domestic factors, rather than trade, are having a bigger impact on the economy, said Julian Evans-Pritchard of Capital Economics.

"We feel that the global economy and global trade are increasingly moving towards reducing protectionism and. freedom", he said.

Investment "is being held back by trade war uncertainties", said Adams of PNC.

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Inflation jumped to 3% in September, driven by a 69% surge in pork prices due to the loss of millions of pigs to African swine fever.

The government has sought to help the economy through tax cuts and by taking measures to boost liquidity in the financial system.

The fact that the growth figures have come in below market expectations indicate that China's economy is hurting more than many thought.

Over the 22 months since President Trump imposed tariffs on solar panels and washing machines in late January 2018 Chinese economic growth has decreased 11.7%, from 6.8% in the first quarter of to its current 6%.

There were signs from China that these numbers were going to be worrying. "Beijing's approach has been rather measured and targeted and they will continue to be so".

The GDP figures emerged just one week after the USA and China reached a tentative trade truce to avoid more damages to the world's two largest economies.

But property transactions slowed during what is traditionally China's "Golden September" peak season for new home sales, hurt by authorities persistent crackdown on speculation, which showed few signs of easing. But these challenges pose new headaches for policymakers who are trying to manage the slowdown.

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