China faces chill as growth slows

● A raft of Chinese data over coming weeks is expected to show that the world’s secondbiggest economy cooled slightly in March from the first two months of the year, with the main risk now centred on an escalating China-US trade spat.

On Wednesday, Beijing slapped additional tariffs on a range of US goods in a swift retaliatory action after Washington had raised the stakes in the growing trade showdown by proposing extra 25% tariffs on some 1 300 industrial technology, transport and other Chinese products.

Analysts fear a full-blown US-China trade spat could have damaging economic consequences, hitting exporters of both nations and shattering global growth.

Economists are expecting China’s growth to slow to 6.5% this year, from a solid 6.9% last year, due to a cooling property market and rising borrowing costs.

Export growth is expected to have weakened to 10% last month from February’s 44.5%, according to a Reuters poll of 31 economists. Analysts attributed the pullback in March exports to a downward adjustment after January-February numbers blew past expectations as firms stepped up shipments before the Lunar New Year holiday in mid-February.

A strong yuan could have also weighed on exports. The Chinese yuan gained around 3.7% against the US dollar in the first quarter this year.

Still, there is potential for March exports to surprise on the upside.

“Overall, foreign demand remained strong in the first quarter,” said Lu Zhengwei, chief economist at Industrial Bank.

“With a possible trade war with the US looming, Chinese exporters may front-load their overseas shipments before the US tariffs kick in.”

Industrial output growth is likely to have slowed to 6.2% in March, even though authorities lifted winter pollution restrictions in March. As well, growth in fixed-asset investment likely eased to 7.6% last month.

However, domestic consumption is expected to remain solid, partly offsetting some of the drag from manufacturing.

Bank lending may have risen to 1.2-trillion yuan (about R2.3-trillion) in March after slumping in February, probably hit by a clampdown on riskier financial activity that has fuelled a rapid build-up in debt. Banks extended a record 13.53-trillion yuan in new loans last year.

Foreign exchange reserves, meanwhile, likely rose last month as a stronger yuan and tight regulations discouraged capital outflows, after falling for the first time in 13 months in February.