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% over a year ago, down from the previous quarter’s 6.4%, government data showed Monday.
Forecasters expected China’s economy to rebound in late 2018 but pushed back that target after President Donald Trump raised tariffs on Chinese imports to pressure Beijing over its technology development tactics. Now, economists say the slowdown might extend into next year.
The worse-than-expected figures emerged just one week after the United States and China reached a tentative trade truce to avoid more damage to the world’s two largest economies.
The proportion of South African output going to China, for instance, has shot up from 2% in the mid-2000s to 15% now, according to a study by the McKinsey Global Institute.
Additionally, China consumes 45% of the Democratic Republic of Congo’s exports, 33% of Australia’s and 24% of South Korea’s, according to United Nations data cited in the McKinsey report. Emerging market countries are also increasingly dependent on Chinese investment. China accounts for 13% of foreign direct investment — including corporate mergers and new factories — in Egypt, up from 1% in the mid-2000s, and 8% of Pakistan’s, up from 2%.
Researchers at J.P.Morgan have estimated that if China’s annual growth slows to 4.5% by the end of the next decade, as they expect, global metals prices will plunge 40% to 60%.
IHS Markit foresees world economic growth slowing this year to 2.8% from 3.2% in 2018.
Markets slid lower after the Chinese data were released. Hong Kong’s Hang Seng Index (HSI) and China’s Shanghai Composite Index (SHCOMP) ended down 0.5% and 1.3% respectively. The indexes had gained as much as 0.5% and 0.3% before the GDP report.
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.
Chinese leaders have stepped up spending and bank lending to keep growth within this year’s official target range of 6% to 6.5% and avert politically dangerous job losses. But they face an avalanche of unexpectedly bad news including plunging auto sales.
In 2009, the NBS reported a growth of 6.1% for the first three months of that year. However, Dong said that later was revised up to 6.4%.
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