[Much of the current slowdown can be attributed to domestic factors, such as a sharp deceleration in consumer spending and slower growth in expenditures on infrastructure. Corporate profits are also under strain, and local governments are increasingly struggling to pay back loans, creating the specter of a debt crisis.]
By Anna Fifield
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Workers produce down
coats at a factory for Chinese clothing company Bosideng
in Nantong, Jiangsu
province. China’s economy is slowing, weighed down by
weak domestic demand and
a trade war with Washington. (AFP via Getty
Images/Afp Via Getty
Images)
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BEIJING
— China’s economy recorded
its slowest rate of growth in more than 27 years, as the effect of the trade
war with the United States compounds cooling domestic demand, according to
official statistics published Friday.
President Trump has seized on China’s
weakening economy as evidence that Beijing is desperate to cut a trade deal
with his administration, but analysts said it was not time for the Chinese
government — nor the markets — to panic.
“The trade war might be taking a toll on the
Chinese economy, but there is little evidence yet of a major direct hit on
overall growth,” said Eswar Prasad, an economics professor at Cornell
University and former China director with the International Monetary Fund.
The world’s second-largest economy grew by 6
percent in the three months to the end of September, the weakest quarterly
figure since 1992.
Still, the National Bureau of Statistics said
the growth rate for the first nine months of 2019 now stands at 6.2 percent,
within the government’s target range of 6.0 to 6.5 percent for the year as a
whole.
“In general, the national economy maintained
overall stability in the first three quarters,” said Mao Shengyong, a spokesman
for the statistics department.
But he
warned of trouble ahead, in part because domestic and international economic
situations remain complex. Instability and uncertainties are growing
externally, Mao told reporters, and there is mounting pressure on the domestic
economy.
Much of the current slowdown can be
attributed to domestic factors, such as a sharp deceleration in consumer
spending and slower growth in expenditures on infrastructure. Corporate profits
are also under strain, and local governments are increasingly struggling to pay
back loans, creating the specter of a debt crisis.
There is widespread recognition here that
China cannot sustain the double-digit growth rates it enjoyed until a decade
ago. But party leaders in Beijing have been trying to manage the deceleration
to levels more consistent with China’s status as a middle-income country.
The economy grew at 6.6 percent last year.
The Global Times, a nationalist newspaper
that often reflects the foreign policy thinking of the ruling Communist Party,
tried to strike a glass-half-full tone.
“Growth of 6.0 percent is still the highest
among the world’s major economies. It’s not self-consolation but a reality in
the current global economic landscape,” it said in an editorial Friday evening.
“We should keep our confidence and face up to the variety of problems that have
been hindering our economic development.”
But the trade war has complicated those
efforts, although not as much as Trump has claimed. The impact from tariffs and
other restrictions has shaved only a fraction of a percentage point off the
growth rate, economists say.
The uncertainty created by the trade tensions
with the United States is not helping China manage its slowdown.
It was “obvious” from the numbers that the
trade war was having an impact on the Chinese economy, said Cui Fan, a
professor at the University of International Business and Economics in Beijing.
“There has been a considerable decline in
China’s trade with the United States,” he said, and that has particularly
affected manufacturing companies whose primary market was the United States.
“Up to now, progress has been made in the
China-U.S. trade war, but there are still great uncertainties as to how far the
negotiations would go,” Cui said. “Uncertainty is the biggest fear when it
comes to doing business.”
Beijing has struck a staunch tone throughout
the trade dispute, while also wanting to bring it to an end.
After talks in Washington last week, Trump
said the two sides had agreed to a “phase one” deal in which China would agree
to buy between $40 billion and $50 billion of American farm products, while the
United States would delay a planned increase in tariffs.
But the Chinese side has exhibited greater
caution, referring only to “progress” rather than a “deal.”
Negotiators from both sides are due to meet
again next week.
At a meeting Thursday in Beijing with Evan
Greenberg, chairman of the U.S.-China Business Council, Premier Li Keqiang
urged the United States to “resolve relevant issues through dialogue and
consultation on the basis of equality and mutual respect, so as to advance
bilateral economic and trade ties on the right track,” according to Chinese
state media.
China’s travails come in the context of a
broader global slowdown, which the IMF this week said was partly due to the
trade war.
“Rising trade and geopolitical tensions have
increased uncertainty about the future of the global trading system and
international cooperation more generally, taking a toll on business confidence,
investment decisions, and global trade,” the IMF said in its latest world
economic outlook.
But
China’s situation was not so severe that the Communist Party would feel
compelled to flood the Chinese economy with money, as it did during the global
financial crisis in 2008.
“The government has been relatively
restrained in its use of fiscal and monetary stimulus thus far and is likely to
keep macroeconomic policies in this holding pattern unless there are clearer
signs of a growth stagnation,” Prasad said.
Liu Yang contributed to this report.
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