China moves to lift confidence as economic growth ‘slackens’

Govt trying to navigate through numerous challenges

BEIJING, Oct 20, (RTRS): China’s economic growth cooled to its weakest quarterly pace since the global financial crisis, with regulators moving quickly to calm nervous investors as a years-long campaign to tackle debt risks and the trade war with the United States began to bite.

Chinese authorities are trying to navigate through numerous challenges, as the trade war fears have sparked a blistering selloff in domestic stock markets and a steep decline in the value of the yuan versus the dollar, heightening worries about the growth outlook.

The economy grew 6.5 percent in the third quarter from a year earlier, slower than 6.7 percent in the second quarter, the National Bureau of Statistics said on Friday. Analysts polled by Reuters had expected the economy to expand 6.6 percent in the July-September quarter.

The GDP reading was the weakest year-on-year quarterly growth since the first quarter of 2009 at the height of the global financial crisis.

After another big decline in Chinese stocks on Thursday, policymakers launched a coordinated attempt to soothe markets, with central bank governor Yi Gang saying equity valuations are not in line with economic fundamentals.

Yi and senior regulators pledged targeted measures to help ease firms’ financing problems and encourage commercial banks to boost lending to private firms. Beijing has been stepping up policy support in the last few months to prop up growth.

The Shanghai Composite index, which slumped more than 1 percent in early Friday trading, rallied strongly in afternoon trading to end the day with a 2.6 percent gain.

Third quarter growth was hurt by the weakest factory output since February 2016 in September as automobile makers cut production by over 10 percent amid a sales slowdown.

On a quarterly basis, growth slowed down to 1.6 percent from a revised 1.7 percent in the second quarter, meeting expectations.

Importantly, second quarter sequential growth was revised down from the previously reported 1.8 percent, suggesting the economy carried over less momentum into the second half than many analysts had expected.

Before the data release, economists had expected China’s full-year growth to come in at 6.6 percent this year comfortably meeting the government’s 6.5 percent target - and 6.3 percent next year.

Slow

But now some say growth could slow even more dramatically next year.

China’s once high-flying automakers are now feeling the brunt of weaker consumer spending. Car sales fell the most in nearly seven years in September, data showed last week, with GM and Volkswagen reporting double-digit delcines.

Beijing and Washington have slapped tit-for-tat tariffs on each other in recent months, sparked by US President Donald Trump’s demands for sweeping changes to China’s intellectual property, industrial subsidy and trade policies.

Plans for bilateral trade talks to resolve the dispute have stalled, triggering a domestic equities rout and putting pressure on China’s already softening economy and weakening currency.

China’s exports unexpectedly kicked into higher gear in September, largely as firms front-loaded shipments to dodge stiffer US duties, though analysts see pressure building in coming months.

Infrastructure investment rose 3.3 percent year-on-year for Jan-Sep, slower than 4.2 percent growth in the first eight months of the year.