Chinese GDP growth slows further in Q2 2019, PBoC to continue to adopt targeted policy to support growth

Chinese economic growth decelerated in the second quarter of 2019. On a year-on-year basis, the GDP growth eased to 6.2 percent from first quarter’s 6.4 percent, coming in line with consensus expectations. On a quarter-on-quarter basis, the economic growth slowed to 1.6 percent from 1.4 percent seen in the prior quarter.

Looking at the positive side, the June data for China came out pretty decent and sound. All the activity data surprised on the upside by a large margin. However, on the other hand, the headline growth is still slowing down, noted Commerzbank in a research report.

The market has become quite used to extremely stable growth figures of China. Hence, the impact of the trade tensions on the Chinese economy is of great importance. But there is a mixed picture in the last data set for June. Many data points have underlined the negative effect of the U.S.-China trade war on the Chinese economy. For example, both China’s official and private PMIs reached fresh lows in the month. Moreover, Chinese imports, especially, the manufactured goods, have recorded a slump since the end of 2018. Nevertheless, Chinese industrial production rose considerably by 6.3 percent year-on-year in June, slightly dispelling the worries of trade tensions.

Facing the external headwinds, the domestic market has to play a more critical role, noted Commerzbank. The domestic demand appears fine, at least for now. The property market continues to be the bright spot at the moment, with sales, prices and investment all at increased levels in spite of some softening momentum recently. Moreover, retail sales rose to 9.8 percent year-on-year in June, with automobile sales recovering strongly.

“All told, while there are still concerns that the domestic demand could be inefficient to make up the shortfalls due to trade tensions, it might be still too early to expect a complete a fallout of Chinese economy”, added Commerzbank.

According to an ANZ research report, the People’s Bank of China is expected to continue to adopt a targeted policy as opposed to quantitative easing to underpin growth.

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