China economy reports lowest GDP growth on record for second quarter as US trade war bites

China’s economy grew by 6.2 per cent in the second quarter of 2019, the lowest figure since records began in March 1992, but other data for June better than expected
While this falls within Beijing’s GDP target for the year of between 6 to 6.5 per cent, it also shows the pressure the economy is under with the US trade war ongoing

China economy

Sidney Leng

Published: 10:00am, 15 Jul 2019

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China’s economic growth slowed to a record low of 6.2 per cent in the second quarter of 2019 as the shock from the protracted trade war with the United States continued to resonate through the world’s second largest economy.

Gross domestic product (GDP) growth slid from 6.4 per cent in the first quarter, according to data published by the National Bureau of Statistics (NBS) on Monday. Even during the global financial crisis in 2009, China’s quarterly GDP growth did not dip below 6.4 per cent.

The figure, nonetheless, falls within the range of Beijing’s target growth rate for the year of between 6.0 to 6.5 per cent and was generally expected. The median forecast of a poll of analysts conducted by Bloomberg was 6.2 per cent, but some had predicted worse, with many having deep concerns about the effect of the trade war.

The data also showed that over the first half of the year, China’s economy grew by 6.3 per cent.

“The economic data is still facing downturn pressure [in the second half of the year]. While there are also many positive factors, the market vitality is gradually being stimulated,” said NBS spokesman Mao Shengyong.

Other data released on Monday, mostly for the month of June, was better than expected. Industrial production – a measure of the output of the industrial sectors in China’s economy, including manufacturing, mining and utilities – grew by 6.3 per cent from a year earlier.

This was up from 5.0 per cent growth in May, which was the lowest since February 2002, and well above the expectations of a poll of economists, which had predicted 5.2 per cent growth.

Within industrial production, manufacturing grew by 6.2 per cent year-on-year, up from 5.0 per cent in May. This beat expectations, and contrasts sharply with the weak sentiment among manufacturers surveyed in June’s purchasing managers’ index.

The economic data is still facing downturn pressure [in the second half of the year]. While there are also many positive factors, the market vitality is gradually being stimulated

Mao Shengyong

Furthermore, China’s marginalised private sector provided the main driver of industrial growth in June, expanding by 8.3 per cent in June and 8.7 per cent in the first half of the year, compared with 6.2 per cent and 5.0 per cent for state-owned enterprises over the same periods, respectively.

Fixed asset investment, the national spend on physical assets such as real estate, infrastructure or machinery, grew by 5.8 per cent in the January to June period compared to a year earlier, higher than the 5.6 per cent growth reported in May and above the Bloomberg poll median, which had predicted no change.

Investment in China’s mining sector surged by 22.3 per cent over the first half of the year, while government investment outstripped that of private investment. Investment in property development, meanwhile, grew by 10.9 per cent in the first half of the year, down from 15.8 per cent in the year to May.

"The level of investment was still relatively low,” added NBS spokesman Mao.

Retail sales grew by 9.8 per cent, up from May’s reading of 8.6 per cent. That had been a significant improvement on April’s 7.2 per cent growth, the lowest figure since May 2003, but with China’s imports declining by 7.3 per cent in June, concerns remain about consumption.

This was above the median estimate of the Bloomberg poll which had predicted 8.5 per cent growth for June. All the main retail verticals showed positive growth, led by the cosmetics, automotive and home appliances sectors. Home appliances, which Beijing has been actively trying to stimulate, grew by 7.7 per cent in June.

China’s automotive sector has had a troubled time, but Monday’s data showed that the retail sales value for automobiles grew by 17.2 per cent in June and 6.7 per cent in the first half of the year.

This was reflected in earlier releases by the car industry. Last month, sales of passenger and commercial vehicles were down 9.6 per cent annually, but grew 7.5 per cent from the level in May, according to the China Association of Automobile Manufactures.

Another report from the China Passenger Car Association said sales of passenger vehicles were up 4.9 per cent year-on-year and up 11.5 per cent from the level in May. However, it is understood that vendors were offering discounted products as a means of clearing inventory, ahead of new regulations on vehicle emissions.

The latest data follows on from Friday’s trade figures, which showed that China’s exports and imports both contracted in June, following an escalation in the trade war over the second quarter of the year.

All eyes will be on this month’s meeting of the Politburo, the nation’s top policymaking body. During the quarterly meeting, China’s top leadership discusses the state of the economy and decides on policy signals.

Additional reporting by Orange Wang

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