Economic slowdown strikes China
Effects of tariff battle may ripple worldwide
BEIJING — China’s economic growth sank to its lowest level in at least 26 years in the quarter ending in June, adding to pressure on Chinese leaders as they fight a tariff war with Washington.
The world’s second-largest economy grew 6.2 percent over a year ago, down from the previous quarter’s
6.4 percent, government data showed Monday.
Hopes for an early growth rebound faded after President Donald Trump raised tariffs on Chinese imports in May to turn up pressure on Beijing over the aggressive tactics it’s using to challenge American technological dominance. Now, economists say the slowdown might extend into next year.
Weaker Chinese activity carries global repercussions. China is the world’s second-biggest export market, behind the United States. Countries that feed raw materials to Chinese factories, from Chilean copper to Indonesian coal, are especially vulnerable to decelerating growth in China.
The proportion of South African output going to China, for instance, has shot up from 2 percent in the mid-2000s to 15 percent now, according to a study by the Mckinsey Global Institute. Then there’s the Democratic Republic of the Congo, which sends 45 percent of its exports to China, according to United Nations data cited in the Mckinsey report. In addition, emerging-market countries are increasingly dependent on Chinese investment.
Among major economies, Australia sent 35 percent of its exports to China in April, Brazil 30 percent and South Korea 24 percent, according to the Peterson Institute for International Economics.
Besides hurting countries that export raw materials to Beijing, the Chinese slowdown could come back to squeeze American companies that sell into the vast Chinese consumer market, like Procter & Gamble and General Motors. Slowing demand in China could depress their revenue, earnings and stock market value, said Mary Lovely, a Syracuse University economist who studies trade.
Eventually, weaker stock prices could undermine U.S. consumer confidence and the American economy, she said.
“President Trump is probably happy that he’s starting to tank the Chinese economy,” Lovely said. “But it’s a case of be careful what you wish for.”
IHS Markit foresees world economic growth slowing from 3.2 percent in 2018 to 2.8 percent this year.
A decelerating “China is certainly part of that,” said Sara Johnson, IHS’ executive director for global economics.
But the world faces other problems, too. For one thing, Trump’s tariffs on imports from a host of countries, and the retaliation they have drawn from America’s trading partners, are crimping world trade and investment.
Manufacturers worldwide are also sitting on unsold stockpiles of goods, and growth will likely slow as they pare their inventories, Johnson said.
Trump and President Xi Jinping agreed last month to resume negotiations in a fight that has battered both American and Chinese exporters. But economists warn their truce is fragile because they still face the same array of disputes that caused talks to break down in May.