China’s economy faces a setback

China’s economy faces a setback

BEIJING: China's economy expanded at its slowest rate in nearly three decades during the third quarter, held back by cooling domestic demand and a protracted US trade war, according to an AFP survey of analysts.

Gross domestic product (GDP) figures due on Friday are expected to show that the Chinese economy expanded 6.0 percent in July-September, compared with 6.2 percent in the second quarter, the poll of 13 economists predicted.

The reading would mark the worst quarterly figure since 1992 but be within the government's target range of 6.0-6.5 percent for the whole year. The economy grew at 6.6 percent in 2018.

Beijing has stepped up support for the economy with major tax and rate cuts and has scrapped foreign investment restrictions in its stock market.

In its latest measure to shore up growth, the central bank said Wednesday it was pumping 200 billion yuan ($28 billion) into the financial system through its medium-term lending facility to banks, which is designed to maintain liquidity in the market.

But the efforts have not been enough to offset the blow from softening demand at home.

The trade conflict and weak domestic demand prompted the International Monetary Fund to lower its 2019 growth forecast for China from 6.2 percent to 6.1 percent on Tuesday.

The long-running trade war with the US has also chipped away at the Chinese economy.

This week, China reported weaker-than-expected import and export figures for September after Washington imposed new tariffs that month, triggering a tit-for-tat response from Beijing.

“Trade conflict with the US remains a wild card," said Tommy Wu from Oxford Analytics.

“Elevated US-China tension will continue to weigh on the external outlook, despite the delay of additional US tariff imposition on a range of consumer goods… And we think that a US-China trade deal remains unlikely any time soon."

A partial US-China deal announced by President Donald Trump last week offers a temporary reprieve from further tariff hikes.

But this initial agreement — which included increasing purchases of US farm products and protections for intellectual property — will take weeks to finalise and does not tackle thornier issues such as Chinese subsidies to state firms.