14/08/2018 08:00 AST

China’s economy is showing further signs of cooling as the US prepares to impose even tougher trade tariffs, with investment in the first seven months of the year slowing to a record low and retail sales softening, data showed on Tuesday.

Fixed-asset investment growth slowed more than expected to 5.5 percent in January-July, highlighting weakening domestic demand and faltering business confidence as the US trade war adds to domestic pressures from Beijing’s crackdown on debt and pollution.

The pace of investment was the weakest on record going back to early 1996, according to data on Reuters Eikon. Investment had been expected to grow 6.0 percent in the first seven months of the year, steady from January-June.

Retail sales also missed expectations, with Chinese consumers more reluctant to spend on everything from cosmetics and other everyday goods to big-ticket items such as home appliances and furniture.

Sales rose 8.8 percent in July from a year earlier, below an expected 9.1 percent and down from 9.0 percent in June. Industrial output failed to accelerate as expected. It rose 6.0 percent in July, the National Bureau of Statistics said, missing analysts’ estimates for a rise of 6.3 percent and compared with a rise of 6.0 percent in June.

While recent readings on trade and inflation have so far shown only limited impact from the trade war with Washington on the world’s second-largest economy, there are growing concerns that the escalating dispute could produce a sharper Chinese economy slowdown than expected just a few months ago.

China and the US have slapped a series of tit-for-tat tariffs on each other’s goods in July and August and more are due to kick in next week. In one of the few brighter spots in the data, private sector fixed-asset investment rose 8.8 percent in January-July, compared with an increase of 8.4 percent in the first half. Private investment accounts for about 60 percent of overall investment in China.

But growth in infrastructure spending, a powerful economic driver last year, slowed to 5.7 percent in the first seven months of the year, compared with a rise of 7.3 percent in January-June.

Still, there were some very early signs that Beijing’s recent shift in focus to growth boosting measures may already be helping to cushion the broader economic slowdown. Real estate investment rose 13.2 percent in July from the same period a year earlier, the fastest pace since October 2016 and higher than June’s 8.4 percent rise, according to Reuters calculations.

July new construction starts jumped 32.4 percent on-year, the most since late 2014. New infrastructure loans also rebounded sharply in July to 172.4 billion yuan ($25.05 billion), an increase of 46.9 billion yuan over the month before, China’s banking and insurance regulator said in a statement on Saturday.

China’s Politburo said in a meeting last month it would keep its economic growth within a reasonable range and achieve this year’s target, despite the risks to growth.

In a bid to boost growth and weather the US trade war, Beijing has said it would step up infrastructure investment in targeted areas and resort to more accommodative fiscal policy. It also has announced tax cuts and large liquidity injections which are tamping down borrowing costs. That has raised fears among some China watchers that Beijing is returning to the days of debt-fueled stimulus, and is relaxing its multi-year campaign to reduce risks in the financial system and a mountain of debt.

But unless business conditions deteriorate markedly, most economists believe Beijing will stick with its deleveraging campaign, albeit at a more cautious pace, as it waits to see how the trade dispute plays out.

For now, a return to massive money printing like that seen during the global financial crisis, which would risk a further debt blowout, does not seem to be on the cards.


Arab News

Ticker Price Volume
STC 80.00 582,963
ZAIN.TASI 6.15 1,527,023
SABIC 123.40 5,002,630
ALINMA 21.98 33,514,721
SAUDIRE 7.37 359,805
Index Closing Change
NIKKEI 225 21,857.43 -440.65 (-1.97%)
DAX 12,358.74 -65.61 (-0.52%)
S&P 500 2,821.93 -11.35 (-0.40%)
Global shares rise as investors watch trade war

20/08/2019

Global stock markets recovered some further ground Monday after last week’s turbulence when ongoing concerns about a trade war between the US and China and an array of worries about waning growth acr

Arab News

Trade war threatens reign of luxury stocks

14/08/2018

An escalating trade war between the United States and China could abruptly end a glittering stock market run for luxury goods firms, with some investors already put off by lofty valuations in a secto

Gulf News

China unloads US soybean cargo

14/08/2018

A vessel carrying US soybeans was unloading its cargo worth at least $23 million at the Chinese port of Dalian on Monday, becoming one of the first shipments to incur hefty new import duties as the t

Oman Daily Observer

Global airline passenger traffic accelerates in June

13/08/2018

The International Air Transport Association (IATA) announced global passenger traffic results for June showing that demand (measured in total revenue passenger kilometers or RPKs) rose by 7.8% compar

Saudi Gazette

Trump’s trade war with China may backfire

13/08/2018

A key objective of President Donald Trump’s trade war is to pressure Beijing to “buy American”, but when it comes to millions of dollars of US meat imports, China may simply take its business elsewhe

The Gulf Today