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Thread: #China’s Slowdown Deepens; Industrial Output Growth Falls to 17-1/2 Year Low theepochtimes.com/chinas-slowdow…
The slowdown in China’s economy deepened in August, with growth in industrial production at its weakest 17-1/2 years amid spreading pain from a trade war with the United States and softening domestic demand.
Retail sales and investment gauges worsened too, data released on Sept. 16 showed, reinforcing views that China is likely to cut some key interest rates this week for the first time in over three years to prevent a sharper slump in activity.
Despite a slew of growth-boosting measures since last year, the world’s second-largest economy has yet to stabilize, and analysts say Beijing needs to roll out more stimulus to ward off a sharper slowdown.
Industrial output growth unexpectedly weakened to 4.4 percent in August from the same period a year earlier, the slowest pace since February 2002 and receding from 4.8 percent in July. Analysts polled by Reuters had forecast a pick-up to 5.2 percent.
In particular, the value of delivered industrial exports fell 4.3 percent on-year, the first monthly decline since at least two years, Reuters records showed, reflecting the toll that the escalating Sino-U.S. trade war is taking on Chinese manufacturers.
The protracted trade war escalated dramatically last month, with President Donald Trump announcing new tariffs on Chinese goods from Sept. 1, and China letting its yuan currency sharply weaken days later.
After Beijing hit back with retaliatory tariffs, Trump said existing levies would also be raised in coming months, in October & December. While the two sides are set to resume negotiations in October, most analysts do not expect a durable trade deal, or significant de-escalation.
Room for stimulus is believed to be limited by worries about rising debt risks, with policy easing by the People’s Bank of China (PBOC) expected to be more restrained than the U.S. Federal Reserve or European Central Bank.
Industrial investment is the main drag as investment growth in the mining and the manufacturing sectors eased off in the first 8 months. But infrastructure investment—a key driver of growth—picked up to 4.2% in the first eight months this year, from 3.8% in January-July period.
Earlier this month, the PBOC cut the amount of cash banks are required to hold in reserve for the 7th time since early last year in order to increase funds for lending. “The PBOC’s RRR cuts alone are insufficient to secure growth above 6.0% this year,” said analysts at ANZ.
“In order to guide financing costs lower, the People’s Bank of China will need to cut the open market operation (OMO) rate or medium term lending facility (MLF) rate in the fourth quarter, in our view.”
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