China’s GDP Growth Slowest Since 2009

October 19, 2018 – China’s economy grew 6.5 percent from a year earlier during the July-September period due in part to still robust external demand, official data showed today, but the pace was the slowest since 2009 amid a tit-for-tat tariff escalation with the United States.

Although the headline figure was in line with the government’s target of around 6.5 percent for the year, it was down from the 6.7 percent growth in gross domestic product in the second quarter of this year.

The latest GDP data came amid mounting fears that the world’s second-biggest economy would be weighed down by an intensifying trade war with the United States, which has imposed higher tariffs on a wide range of imports from China.

Analysts say China is expected to lose growth momentum further, as prices of the country’s products will be jacked up in the United States, the world’s largest market, choking exports — a major driver of the Chinese economy.

A possible economic slowdown is also likely to prevent the Chinese leadership, led by President Xi Jinping, from achieving its goal of building a “moderately prosperous society,” defined by Beijing as doubling its 2010 GDP and per capita income by 2020.

Friday’s data showed China’s economy grew 6.7 percent on year to 65.09 trillion yuan ($9.38 trillion) in the first three quarters of 2018. Growth of investment and retail sales, however, slowed as domestic demand has become sluggish.

Investment in fixed assets, which includes spending on property construction and infrastructure, rose 5.4 percent in the nine months of this year, 0.6 percentage point lower than the first six months.

During the same period, growth in retail sales of consumer goods climbed 9.3 percent, down from 9.4 percent in the first half of 2018.

The total value of exports increased 6.5 percent in the nine months from January, but many economists are skeptical about whether China’s shipments will continue to grow down the road.

Last month, Washington invoked tariffs on an additional $200 billion in Chinese imports. With this third round of tariffs, the United States is now imposing double-digit tariffs on around half of the products it imports from China each year.

China immediately took retaliatory action, slapping additional tariffs on $60 billion in U.S. imports, which means Beijing has so far levied tariffs on more than 80 percent of all goods imported from the United States.

To realize the “moderately prosperous society,” where all citizens can enjoy comfortable lives, China’s economy needs to expand at an average annual rate of around 6.5 percent.