Freighter deal takes off at UK air show
CHINA’S economy expanded at a slower pace in the second quarter as Beijing’s efforts to contain debt hurt activity, while June factory output growth weakened to a twoyear low in a worrying sign for investment and exporters as a trade war with the US intensified.
The world’s second-largest economy grew 6.7 percent in the last quarter year-on-year – matching expectations – and looks set to meet the official 2018 growth target of around 6.5 percent, though the trade row with Washington, a slowing property market and lower shipments have sharply increased risks to the outlook.
“We expect growth in H2 to be challenged by the slow credit growth and softer real estate activity. Also, the intensifying trade conflict with the US will start to weigh on growth,” Louis Kuijs, Head of Asia Economics for Oxford Economics in Hong Kong, wrote in a note.
The second quarter GDP figure was slightly below the first quarter’s 6.8 percent, the National Bureau of Statistics said yesterday, with net exports a drag on overall first half economic growth.
As the trade tussle with Washington shows no signs of ebbing and the external sector continues to weigh on China’s economy, more timely monthly activity data indicated growth was slowing at a faster pace going into the second half of the year.
First-half growth in fixed asset investment – which includes spending on new homes, factories, roads and ports – was a record low, while industrial output for June matched the slowest growth rate in more than two years at 6 percent and missed forecasts of 6.5 percent expansion.
The data weighed on Asian markets, adding to concerns about the impact from the Sino-US trade war on the global economy and China. The Shanghai Composite index and the blue-chip CSI 300, the world’s worst-performing major indexes this year, each fell more than 0.6 percent. MSCI’s broadest index of AsiaPacific shares outside Japan fell 0.4 percent.
On a quarterly basis, growth picked up 1.8 percent from 1.4 percent in the first quarter, beating expectations of 1.6 percent growth, mainly supported by domestic consumption.
Despite slower factory output growth overall, China’s steel mills churned out record amounts of the construction material in June as producers rushed to cash in on hefty margins. China’s economy has already felt the pinch from a multi-year crackdown on riskier lending, that has driven up corporate borrowing costs, prompting the central bank to pump out more cash by cutting reserve requirements for lenders.
Front-loading
Data on Friday showed China’s exports grew solidly in June, though analysts suggest front-loading of shipments ahead of tariffs taking effect may have boosted the figures.
The administration of US President Donald Trump has raised the stakes in its trade row with China, saying it would slap 10 percent tariffs on an extra $200 billion (R2.65 trillion) worth of Chinese imports. That threat came only days after both countries slapped tit-for-tat tariffs on $34bn worth of each other’s goods.
The property market, a key economic driver, also slowed, as property investment posted its weakest growth in six months in June, with sales also cooling.
Faced with slowing domestic demand and the trade war risks, Chinese policymakers have started to step up support for the economy and have softened their stance on deleveraging.
Some analysts are calling for even stronger measures.
Statistics bureau spokesperson Mao Shengyong told reporters yesterday that he expects more infrastructure projects to be launched after Beijing completes its inspections on local government debt.
Fixed asset investment in infrastructure grew 7.3 percent in the first half of the year, compared to 21.1 percent in the first half of 2017.
China is looking to consumer spending to drive the economy as it rebalances away from government-driven investment and the export sector. – Reuters BOEING kick-started a contest for tens of billions of dollars of orders at the Farnborough Air Show yesterday, with a $4.7 billion (R62bn) deal for freight planes with delivery firm DHL.
Even before the first displays took to the skies over a sun-baked southern England, the US planemaker said DHL had placed an order for 14 777 freighters, and purchase rights for seven additional freighters.
Boeing and European rival Airbus are expected to make several announcements on day one of the July 16-22 event, industry sources said.
There may be an intense battle for sales in the 100-150seat market where Airbus and Boeing have forged new alliances.
Despite warnings from some analysts that the pace of orders could slow after an eight-year boom, there were signs of brisk activity as negotiators thronged London hotels on Sunday and some haggled over last-minute air show deals, observers said.
However, bankers said they would be watching closely to see how many of the hundreds of orders anticipated this week were new and how many involved adjusting earlier business or switching models, something not always easy to spot at first.
Higher oil prices and interest rates are seen as a warning sign that the long-running aviation boom may be peaking.
The week is expected to confirm demand for narrowbody jets from airlines such as Mexico’s VivaAerobus, which is shopping for some 40 Airbuses, or lessors like Goshawk and Jackson Square, both seen interested in jets in the Boeing 737 MAX category. Major lessors Air Lease and Avolon are also in town.
Both Airbus and Boeing are under pressure to increase orders for some of their wide-body jets due to a recent slowdown in that part of the market. One exception is the Boeing 787, after a multi-year effort to end delays and cost overruns. Airbus could secure an order for a new A350 customer in Taiwan and Boeing will be looking to reinvigorate 777X sales.
The Farnborough Airshow is the industry’s biggest event this year. It alternates with the Paris Air Show and collectively they account for over a quarter of industry order intake each year. – Reuters