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ECONOMY: Growth slows sharply
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Growth slows sharply
By Morgan Brady

BT 201906 economy 01

4月份,美国新一轮贸易战关税生效前最后一个月,中国经济出现增长极速放缓势头,工业生产和零售增长都大幅下滑。

总体情况是,中国经济正在失去第一季度的增长势头,此时它正在陷入与美国不断加剧的贸易战。增长放缓也可能重新引发是否需要实施更多财政和货币刺激以支撑经济的争论。

因第一季度GDP数据强于预期,中国政府降低了进一步刺激经济的需求,但从4月份数据来看,工业生产指标,制造业产出同比增长指标,零售同比增长指标以及用于衡量房地产,基础设施等的固定资产投资指标增长率均下降明显。中国的刺激措施可能开始消退,中央政府已经对银行进行了多轮降息,刺激了贷款流入经济。下一步,中国政府还将会做些什么捍卫经济还有待观察。

这些数据都低于预期的事实表明,美国的关税开始严重削弱中国经济。与此同时,美国几天前宣布将取消对加拿大和墨西哥进口钢铁和铝的关税。这一行动有助于消除北美国家之间的主要问题,值得注意的是,此举包括一项协议,限制在北美以外生产的金属在北美境内进行交易。这很可能是针对中国的。

BT 201906 ECONOMY 02Workers in a TMall.com warehouse gather orders from customers in Jiangmen, Guangdong Province

China’s economy looked to have had its growth slow sharply in April, the last month before new US trade war tariffs took effect, with both industrial production and retail sales growth showing significant declines.

BT 201906 ECONOMY 03An employee works on the production line at a factory of Chinese carmaker JAC Motors in Weifang, Shandong province

The big picture is that China’s economy is losing the momentum it gained in the first quarter, at a time when the trade war with the US is being intensified. Over the past few weeks, the world’s two largest economies have exchanged tit-for-tat tariffs, as it looked like chances of a near-term trade deal have dwindled.
 

The weak data are also likely to start the debate over whether China needs to enact more fiscal and monetary stimulus to prop up the economy. After the stronger-than-expected first quarter GDP figure, the Chinese government had downgraded the need for further stimulus.

BT 201906 ECONOMY 05A worker checking equipment at a textile factory in Jinjiang, Fujian

Industrial production – a measure of the output of the industrial sectors in China’s economy, including manufacturing, mining, and utilities - grew by 5.4% in April from a year earlier. This was well down from 8.5% in March, which was also the lowest reading, since November 2018.
 

Within the industrial sector, manufacturing output grew by 5.3% y-y, down from 8.5% last month. This will cause fears over the ability of Chinese producers to deal with an uprising trade war with the US, which seems that they will have to pay higher tariffs, both for imports and exports, where US suppliers or buyers are involved.
 

The Chinese government made a nod to these concerns by including for the first time an exclusion mechanism in its latest round of tariffs on US$60 billion of US imports. These will take effect on June 1st, but it is said that Chinese companies will have the chance to apply for an exemption, because of the need to support key domestic industries and employers. Retail sales, a measure of consumer demand in China, grew by 7.2% in April from a year earlier. This was lower than the expected figure of 8.6% and points to slowing consumption in the world’s most populous nation.

BT 201906 ECONOMY 07A customer selecting imported items at a store in the Qingdao free trade port area.

This was the lowest figure for retail sales since May 2003, when it grew 4.3%. It suggests that China’s efforts to stimulate consumption are wearing off. Fixed asset investment, which measures spending on physical assets, such as real estate, infrastructure or machinery, grew 6.1 percent for the year to date, down on the previous reading of 6.3% for the January to March period. Exports dropped by 2.7% in April, countering a 14.2% rise in March and an economic growth rate of 6.4% in the first quarter of 2019.
 

China’s stimulus measures may be starting to wear off, and the central government had engaged in multiple rounds of rate cuts for banks, encouraging the flow of lending into the economy.
 

However, with tariffs on US$200 billion of Chinese goods being risen to 25% and further 25% tariff to be applied to the most of the remaining Chinese exports to America, valued at around US$300 billion, it remains to be seen what Beijing will do to defend its economy.
 

While this gives negotiators time to reach a deal, it also gives companies time to get their export orders in early. The fact that these data were all lower than expected makes analysts feel that the US tariffs are beginning to make a serious impact on the Chinese economy, just when pressures are about to rise.

BT 201906 ECONOMY 04Containers are being transported by cranes at a fully automatic container berth of Port of Qingdao in Qingdao city.

Meanwhile, the United States announced a few days ago that it will eliminate tariffs on imports of steel and aluminum from Canada and Mexico. Despite US demands, there will be no quotas replacing the tariffs. This action helps to eliminate a major sticking point between the countries of North America, and likely improves the chances that the US Congress will approve the new trade agreement meant to succeed the North American Free Trade Agreement (commonly known as NAFTA). Notably, this action includes an agreement to limit metals produced outside North America from being traded within North America. This was likely meant to be directed against China. Thus, by taking steps to ease trade tensions with allies, the United States is setting the stage for more coordinated action with respect to China.

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