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China’s industrial production growth at lowest in 17.5 years amidst trade war woes

In August, China's Industrial Production growth has been at its weakest in a 17.5 years period, at 4.4%. While many blame the trade war, some analysts say they would not have been very good even without the trade war with the US.

In August, China’s Industrial Production growth has been at its weakest in a 17.5 years period, at 4.4%. As per a report in Reuters, China’s economic slowdown has deepened amidst a trade war with the USA and softening of domestic demand.

A recent report published by Reuters stated that China is set to reduce some key interest rates soon to prevent a sharper slump in activities. The interest cuts, if they happen, will be for the first time in over 3 years. As per data released on Monday, retail sales and investment market have been worsening too.

Beijing is believed to be preparing to release a stimulus package to boost the economy. Despite corrective measures being rolled out since last year, the Chinese economy is yet to stabilise, the report claims.

Industrial output in August has been 4.4% lower than the same period last year, and the lowest since February 2002. Due to the ongoing US-China trade war, the value of delivered industrial exports has fallen by 4.3% compared to last year.

Following US President’s Trump’s announcement of new tariffs on Chinese goods, the Yuan has fallen further. Analysts have stated that despite the two nations resuming face-to-face negotiations next month, any significant de-escalation is not to be expected anytime soon.

However, expectations of stimulus and ease of loan interest rates are not very high either because the People’s Bank Of China is known to be much more restrained than the US Federal Reserve or European Central Bank.

While retail sales have seen mixed results, auto sales have seen a sharp fall. While investment growth in the mining and the manufacturing sectors has been easing up, infrastructure investment has shown marginal improvements. But a fall in industrial investment growth has been dragging overall figures down.

Financial analysts have also been reportedly puzzled by slow construction growth earlier this year. Some are citing deteriorating finances at the local government level as the reason.

Earlier this month, the PBOC cut the amount of cash banks are required to hold in reserve for the seventh time since early last year in order to increase funds available for lending.

Zhou Hao, senior economist at Commerzbank, as per a report in the SCMP,  suggested that while Monday’s figures from the National Bureau of Statistics were even worse than expected, they may not come as a surprise to the policymakers in the nation because they have been expecting this. Hao added that “The economic figures would not be that good even without the Trade War, The slowdown was already projected.”

Researchers from Oxford have already cut China’s growth estimates for 2020 to 5.7%, down from the 6% growth estimate set by the Chinese government.

 

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