Published: Fri, October 19, 2018
Business | By Tara Barton

Trade war and rising debt knock Chinese growth to a new low

Trade war and rising debt knock Chinese growth to a new low

China's third quarter economic growth slowed to its weakest pace since the global financial crisis, and missed expectations, as a campaign to tackle debt risks and the trade war with the U.S. began to bite.

On a quarterly basis, GDP in the third quarter grew 1.6 percent, compared with growth of 1.8 percent in April-June, the National Bureau of Statistics said.

The GDP reading was the weakest year-on-year quarterly growth since the first quarter of 2009 during the global financial crisis.

NBS spokesman Mao Shengyong said China's economic growth remained generally "faced with an extremely complex environment overseas and the daunting task of reform and development at home".

The standoff comes as Beijing is also battling to tackle a mountain of debt, with credit tightening and falling infrastructure investment.

The data Friday showed fixed-asset investment ticked up 5.4 percent year-on-year in the January-September period from record lows the year earlier when Beijing was reining in spending on bridges, railways, and highways.

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Importantly, second quarter sequential growth was revised down from the previously reported 1.8%, suggesting the economy carried over less momentum into the second half than many analysts had expected.

Authorities are also likely to start once again pumping money into infrastructure projects, after slowing down the projects past year as a matter of financial prudence.

The gloomy export picture has reinforced the need for Beijing to rely on its legion of consumers to grow its economy. However, growth could well decelerate further as the effect of US tariffs on Chinese exports take full effect, let alone if the US adds new sanctions, as US President Donald Trump has threatened.

Although exports have always been a staple of China's economy, USA tariffs targeting machinery, electronics, cars and appliances have decreased foreign investment in these sectors.

Business surveys already show many United States and European firms halting investment plans for China as trade tensions cloud future prospects.

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