Yesterday, China released data suggesting a slowdown in its economic growth for the second quarter of 2018, which came in the midst of a continuing and developing trade war between itself and the US. China used the announcement to serve as a warning of the risk of global financial damage if the trade stand-off carries on.
Results for the period from April 2018 to June 2018 show that the level of growth for the economic superpower slipped by 0.1% from the previous quarter of this year to reach 6.7%.
With news continuing to emerge surrounding the imposition of tariffs on various products, the effect should resonate in financial markets across the globe. The announcement of China’s economic slowdown occurred at the same time as a summit between Chinese officials and the EU, with European Council President Donald Tusk saying that the ongoing tensions could turn into a serious “hot conflict” and demanding that key figures get together to find immediate solutions.
Implicating China, the US and Russia together, Tusk used an opportunity at the summit to ask for these economic giants to find joint solutions.
China’s spokesman for its National Statistics Bureau, Mao Shengyong, admitted that this news is not ideal for his country, calling it an “extremely complex environment” that affected financial operations both in China and overseas.
Although these figures were a drop compared to the previous quarter, China was still able to meet government targets of an annual growth figure of 6.5%.
Mao continued to stress the need to combat “world trade protectionism”, which he said is leading to global economic uncertainty and difficulty and putting any chance of a “world economic recovery” at immediate risk.
While claiming that China is in the middle of a “structural adjustment and transformation program”, Mao made clear that there has been unstable economic progress that is yet to balance out. As China is also looking to stave off any devaluation in the yuan, as well as decrease values seen in Chinese stock markets, it faces an uphill struggle to deliver continued economic growth.
Mao also discussed the possibility that China is yet to see any real change in the markets due to the trade tensions and suggested that the second half of 2018 is likely to lead to even harder challenges to find stabilization.
He then went on to warn that these conditions are unlikely to affect China alone. With a global supply chain in place across many developed and emerging countries and a “deeply integrated” world economy, the impact should stretch beyond China and the US and into many related markets around the world.
As back-and-forth retaliation measures take place between China and the US, the stand-off shows no signs of slowing down, with the latest round of tariffs extending the imposition to up to half of China’s exports to the US.
Moody’s Investors Services, the renowned investment specialist, said that Chinese economic growth is likely to continue in this slowing trend, with trade tensions expected to bite sooner rather than later. Alaistair Chan of Moody’s commented: “Trade disputes with the US have hurt market sentiment, and investment is also cooling.
The statistics bureau should recommend more supportive trade policies soon, with the hopes of maintaining more stable economic growth.