China’s 2019Q2 GDP Growth Lowest Since 1992

Stockholm (Ekonamik) – According to the Chinese National Bureau of Statistics, the Chinese economy grew by 6.2% in the second quarter of 2019, down from 6.4% in the first quarter. This is the lowest level of growth since 1992, beating the recent poor performance in 2009Q1, then a result of the financial crisis.

As a result of the historically low GDP growth figures, US President Trump claimed that “tariffs are having a major effect on companies wanting to leave China for non-tariffed countries. Thousands of companies are leaving. This is why China wants to make a deal…” Unsurprisingly, market analysts were less sanguine.

“GDP growth is expected to decline to 6.2% year-on-year, down from 6.4% in the first quarter. This is consistent with the official 2019 target of 6-6.5%, and compares with actual growth of 6.6% last year,” said Silvia Dall’Angelo Senior Economist at Hermes Investment Management in her preview of the data release. “Hard economic data softened in April and May and surveys suggest that this downwards trajectory continued in June – the Caixin composite Purchasing Managers’ Index (PMI) fell from 51.5 to 50.6 in June (a reading below 50 indicates that activity is contracting). The manufacturing sector was behind this: the Caixin manufacturing PMI fell into contractionary territory with a reading of 49.4.”

Craig Botham, Senior Emerging Markets Economist at Schroders was even less worried by the data release. “Given the weak macroeconomic data in April and May, some weakness is unsurprising, and there looks to be some payback from the freakishly strong data prints in March. However, with the distortions arising from policy changes now played out, the better data for June is an encouraging sign for activity in the third quarter,” the economist argued. He concluded by saying that “we stick to our forecast for a recovery in the third quarter, and expect to see easing from the central bank and additional fiscal support provided by the central government by the end of July. Action now should help cement the turning point in the data and support growth through to the end of the year.”

“In our view, the deceleration in Q2 is part of a long-term downward trajectory in Chinese growth, due to a declining working-age population and moderating productivity growth,” commented Dong Chen, Senior Asia Economist at Pictet & Cie. “In addition, earlier government policies that forced a deleveraging of the economy and the elevated trade tensions with the US have also contributed to the cyclical downturn.”

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