China’s economic growth grinds to near 30-year low

Tariff war with US and weaker demand both at home and abroad have hit factory production hard

China’s third-quarter economic growth slowed more than expected and to its weakest pace in almost three decades as the bruising US trade war hit factory production, boosting the case for Beijing to roll out fresh support.

Gross domestic product (GDP) rose just 6.0 per cent year-on-year, marking a further loss of momentum for the economy from the second quarter’s 6.2 per cent growth.

China’s trading partners and investors are closely watching the health of the world’s second-largest economy as the trade war with the United States fuels fears about a global recession.

Asian stocks stumbled after the data, reversing gains made on the UK and European Union striking a long-awaited Brexit deal.

Downbeat Chinese data in recent months has highlighted weaker demand at home and abroad. Still, most analysts say the scope for aggressive stimulus is limited in an economy already saddled with piles of debt following previous easing cycles, which have sent housing prices sharply higher.

Nie Wen, a Shanghai-based economist at Hwabao Trust, pinned the worse-than-expected GDP growth mainly to weakness in export-related industries, especially the manufacturing sector.

“Given exports are unlikely to stage a comeback and a possible slowdown in the property sector, the downward pressure on China’s economy is likely to continue, with fourth-quarter economic growth expected to slip to 5.9 per cent,” Nie said. “Authorities will loosen policies, but in a more restrained way.”

The third-quarter GDP

growth was the slowest since the first quarter of 1992, the earliest quarterly data on record, and missed forecasts for 6.1 per cent growth in a poll. It was also at the bottom end of the government’s full-year target range of 6.0 per cent-6.5 per cent.

Bond issues

In a briefing after the GDP data release, Mao Shengyong, a spokesman for China’s statistics bureau, announced Beijing’s plans to bring forward some 2020 special local government bond issuance to this year, in a move to spur regional infrastructure investment.

Even recent signs of breakthrough in the protracted trade war between Beijing and Washington are unlikely to change the economic outlook any time soon.

The drags on demand, both domestic and global, have hit several key parts of the economy with weakness seen in freight shipments, factory power generation, employment and entertainment spending.