China’s economic growth fell to its lowest level in almost three decades as the world’s second largest economy feels the effects of the long trade war with the United States.
The country’s gross domestic product (GDP) rose 6.2 percent in the quarter that ended in June, the slowest quarter-on-quarter growth since 1992 and down from 6.4 percent in the previous quarter, according to government figures released Monday. The National Bureau of Statistics declared in a statement that the country’s economy will continue to face “downward pressure” in the second half of this year. “The Chinese economy is still in a complex and grave situation,” the Bureau said. “Global growth has slowed and external uncertainties are on the rise
Beijing and Washington recently agreed on a temporary truce from the months-long trade war and plan to resume trade talks. White House trade adviser Peter Navarro said in a television interview last Friday that US Trade Representative Robert Lighthizer would travel to Beijing with Treasury Secretary Stephen Mnuchin in the near future.
However, analysts say there are still question marks on whether the two sides could reach an agreement to cancel the tariffs that have been applied over the past 12 months. “Uncertainty caused by the US-China trade war was an important factor and we think this will persist,”, analysts declared. “Businesses remain skeptical that the two countries will reach a broader trade agreement and recognize that trade tensions may escalate again,”.
These growth figures came after China recorded a drop in both exports and imports in the first six months of this year, suggesting that the trade war is affecting an economy already suffering from weak domestic demand. China’s exports fell 1.3 percent year-on-year in the first half of the year in dollar terms, while imports fell 7.3 percent. The country recorded a sharp drop in exports to the United States, which fell by 8.1% in the first six months of 2019. Imports from the United States fell by 30% year-on-year.
It should also be noted here that China’s ongoing trade war with the US and the economic slowdown have already hurt some of the world’s largest companies.
Apple’s sales (AAPL) in China fell. Revenue in the Greater China region, which includes Hong Kong and Taiwan, fell 21.5 percent in the second quarter to $10.22 billion, with China accounting for about 18% of Apple’s total revenue.
Global automotive brands are also suffering as the world’s largest auto market continues to slow this year, after its first contraction in decades in 2018. Chinese consumers are less willing to make large purchases in an uncertain environment, while the government’s campaign against harmful pollution levels also has an impact.
However, the trade war will help others while hurting China’s growth. According to data from the Census Bureau, Americans are beginning to make more purchases from suppliers in Vietnam, Taiwan, Bangladesh and South Korea in an effort to avoid US tariffs on consumer goods.
Analysts believe that Beijing will soon unveil more stimulus measures in an attempt to stabilize growth, including increased spending on infrastructure and the possibility of a rate cut by China’s central bank, the People’s Bank of China. The US Federal Reserve also suggested it could cut interest rates as well.