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China's GDP growth equals nearly 30-year levels as tariffs hit production



PAGING (Reuters) – China's third-quarter economic growth slowed more than expected and at its slowest pace in nearly three decades, when the impending US trade war hit factory production, giving Beijing a boost .

People enjoy a beach near a port at sunrise in Kinhuangdao, Hebei Province, China October 15, 2019. REITERS / STRINGER

Gross Domestic Product (GDP) grew only 6.0% y / y which marks an additional loss of inertia for the economy of 6.2% growth in the second quarter.

Trade partners and investors in China are closely watching the health of the world's second-largest economy as the trade war with the United States feeds fears of a global recession.

Asian stocks stumbled after data, turning over profits from the UK and the European Union, reaching the long-awaited Brexit deal.

Chinese data in recent months have highlighted weaker demand at home and abroad. However, most analysts argue that opportunities for aggressive incentives are limited in an economy already burdened with piles of debt after previous easing cycles that have sent home prices sharply higher.

We Wen, a Shanghai-based economist at Hwabao Trust, nails the worse-than-expected GDP growth mainly to a weakness in the export-related industry, especially in the manufacturing sector.

"Given that exports are unlikely to lead to a recovery and eventual slowdown in the property sector, the pressure to shrink China's economy is likely to continue, with economic growth expected to decline to 5 in the fourth quarter," 9%, "Ni said.

"Authorities will loosen policies, but in a more restrained way."

GDP growth for the third quarter was the slowest since the first quarter of 1992, the earliest quarterly data, and missed growth forecasts by 6.1%. in a Reuters poll by analysts. It was also at the lower end of the government's year-round target range of 6.0% to 6.5%.

At a briefing following the release of GDP data, Mao Shengyong, a spokesman for the Chinese Bureau of Statistics, announced Beijing's plans to propose some special government bond issues this year in 2020 to stimulate investment in regional infrastructure.

Even the recent signs of a breakthrough in the protracted trade war between Beijing and Washington are unlikely to change economic prospects any time soon.

U.S. President Donald Trump said last week that the two sides reached an agreement on the first phase of the deal and stopped tariff increases, but officials warned that much more work needs to be done.

In September, China's exports declined, while imports shrunk for the fifth consecutive month.

Demand worsening, both internally and globally, has affected several key parts of the economy with weaknesses in freight, electricity generation, employment costs and entertainment. In September, factory door prices fell at their fastest pace in three years.

The Mao of the Bureau of Statistics stated that there was ample opportunity for a change in monetary policy, as rising consumer inflation was driven mainly by volatile food prices.

The International Monetary Fund warned that the US-China trade war would slow global growth in 2019 to its slowest pace since the 2008-2009 financial crisis, but said output would recover if their Dooling tariffs are eliminated.

Beijing relies on a combination of fiscal stimulus and monetary relief to curb current delays, including trillions of yuan in local government tax cuts and bonds to finance infrastructure projects and efforts to stimulate bank lending.

But the economy has been slow to react with shaky business confidence and local governments are facing mounting tensions as tax cuts hit revenue, weighing investment.

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Contrary to the disappointing headline of GDP, China's industrial production grew better than expected in September by 5.8%, faster than the 17-year low published in August.

The situation was in line with signs of increased domestic procurement, although overall demand remained at historically weak levels. Analysts expected industrial output to grow by 5.0% in September.

September industrial production was also in line with recent business studies, which noted new domestic orders in the food, textile and electrical machinery, although growth in other products such as cement, crude steel and automobiles slowed further.

The Hwabao Trust Nie does not expect stronger production to continue, slowing global demand, suggesting a rise in broader economic growth remains unlikely.

Investments in fixed assets increased by 5.4% from January-September, which is expected, but decelerated from 5.5% in the first eight months.

Private equity investment, representing 60% of the country's total investment, increased 4.7% in January-September, compared to 4.9% in January-August.

Retail sales increased 7.8% compared to the previous month last month, in line with expectations and faster than 7.5% in August.

Slideshow (3 images)

In another positive sign, Chinese property investment remained viable in September, compounded by the rise in new construction activities.

But real estate deals slow down during the traditional peak season in China for "Golden September" for new home sales affected by stubborn anti-speculation authorities that show little sign of relief.

"Because infrastructure investment is unlikely to recover strongly, preventing a large slide in real estate investment will be crucial for the authorities as they seek to stabilize economic growth next year," says Jiang Yi, chief an economist at Beijing-based Zhonghai Shengrong Capital Management,

Reporting by Kevin Yao and Gabriel Crossley; Additional reporting by Yawen Chen; Written by Stella Qiu and Ryan Wu; Editing by Sam Holmes

Our Standards: The Thomson Reuters Principles of Trust.

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