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China's growth drops to 6.5%; Finance officials scramble to calm investors

BEIJING China's economic expansion declined to its weakest pace since the financial crisis, as the best financial inspectors launched an…

BEIJING China’s economic expansion declined to its weakest pace since the financial crisis, as the best financial inspectors launched an extraordinary concerted effort to calm outward investors.

Growth in the third quarter fell to 6.5% of market expectations, revealed official statistics published Friday Friday. Growth in industrial output and consumption weakened during the quarter, while exports lasted despite the country’s bruising match with the United States

Just before the release of the People’s Bank of China Gov. Yi Gang, Head of Banking and Insurance Guo Shuqing and Top Securities Managers Liu Shiyu All issued statements that encourage investors to remain calm. Mr Guo said that “abnormal fluctuations” in Chinese stock markets do not reflect the country’s economic fundamentals and “stable financial system”. Shanghai Composite Index &#821

1; the worst artist among global benchmarks – has decreased by 25% so far this year. It fell as much as 1.1% after opening Friday, but recovered in late morning trading.

Quarterly growth of 6.5 percent is the lowest since the first quarter of 2009 and is mixed news for Chinese leaders as they adhere to a long-standing trade dispute with Washington. While the economy is still on track to meet Beijing’s full-year development target of around 6.5%, Q3 results showed more signs of weakness – a recovery in industrial output, slowing down retail sales, anemic big ticket investments and rising corporate values. It may limit Beijing’s room to maneuver when negotiating with the United States, whose economy is growing strongly.

“China’s decision makers are trying to figure out how to respond to the US trade agenda and are less sure they are in the global arena compared with previous cycles,” said Bin Shi, a portfolio manager at Acadian Asset Management in Boston.

Growth in the third quarter decreased from 6.8% in the first half. Part of the slowdown is due to President Xi Jinp’s initiative of the last two years to contain debt and ward off financial risks. The risk management campaign has limited borrowing by local authorities and companies and caused a sharp decline in spending on new roads and factories. Despite the fact that Beijing began to solve its hardware control over credit in recent months, those reliefs that have so far failed to rejuvenate investment in fixed assets, which has been a growth engine for years.

If growth continues to diminish, Chinese officials and government advisors say that Beijing is ready to roll out more growth measures, such as releasing more money to banks to make loans, increasing public spending on infrastructure and lowering corporate tax rates. However, such steps can further aggravate the country’s debt problem. As it is threatening corporate and local debts, it threatens long-term health in the world’s second largest economy.

“The government is clearly concerned about the loss of growth,” said Eswar Prasad, a Cornell University economist who is in agreement with Chinese officials. But rising financial risks can limit China’s ability to ease its monetary policy further, said Prasad. It proposes that “fiscal policy should play a stronger counter-cyclical role,” he said.

With the palpable decline and a pallet made by the trade struggle, Chinese consumers have sharpened their handbags. Retail trade increased by 9.3% in the first three quarters of 2018, a sharp decline from 10.4% compared to the corresponding period last year. The fall of the year in China’s stock markets, according to economists and analysts, also takes a toll on consumers. Car sales fell for example for a third straight month in September, which put the country on track for its first annual decline in passenger car sales in nearly three decades.

However, exports were an unexpected bright spot in the third quarter. Chinese companies’ international shipments increased on average by 11.7% year-on-year, a slight improvement from an average of 11.5% monthly growth in the previous quarter.

However, much of the shortage came from manufacturers who drove to fill holiday orders and send out goods before trade disputes worsened. In fact, it is a loan from future growth.

In Shanghai, Taijing International Freight Co., a freight company, has been busy sending goods of clothing, toys, household appliances and other goods. “Some of them are definitely trying to complete orders earlier than planned,” said Pan Haitao, who runs the company.

“The current export development rate is untenable,” says Chinese economist Larry Hu at Macquarie Capital Ltd., a Sydney-based investment bank. Hu says exports growth will fall to between 5% and 10% in the coming months.

The Washington-Beijing trade campaign has escalated beyond the rhetoric of recent months to introduce tariffs on a wide range of respective country’s products, now committing sanctions of $ 250 billion Chinese goods and $ 110 billion for US products. President Trump threatens to raise tariffs in January to 25% from the current 10% on most of these goods and to impose additional 257 billion US dollars on Chinese products, which essentially exposes the entire US Chinese imports for such sanctions.

Write to Lingling Wei at [email protected]

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