China’s economy is showing signs of further slowdown as the US prepares even stricter trade tariffs. Investment growth slowed to a record low and consumers became more careful on their spending, according to data showed on Tuesday.
Fixed asset investment grew 5.5 percent, which is less than expected, in January to July. This was considered as a result of Beijing’s crackdown on lavish local government borrowing for projects to bolster growth.
Industrial output also failed to meet expectations, dragged down by pollution crackdown and the blurry trade outlook. These added to expectations that authorities will soon kick off more policy stimulus measures.
As the trade war threaten the country’s economy, which has already been slowing down, Beijing has pivoted toward boosting domestic demand. The country is taking a more cautious approach in its campaign to reduce financial risks and debt, which has spurred up borrowing costs and triggered a rising number of defaults.
The government has promised to boost spending on railways and roads, which are the country’s usual solutions when the economy shows signs of slowing down. Meanwhile, the central bank is pouring more money into the system and encouraging banks to offer more loans at lower rates to small businesses.
New yuan loans topped expectations in July, according to statistics, in one of the rare upbeat parts of the latest data.
“Admittedly, infrastructure spending may soon bottom out given the recent shift toward a looser fiscal stance and monetary easing should eventually drive a turnaround in credit growth,” said Julian Evans-Pritchard, who is senior China economist at Capital Economics.
“However, these are unlikely to put a floor beneath economic growth until the middle of next year.”
With the economy switching into lower gear even without trade friction, Capital Economics has predicted China’s central bank will soon slash its official lending rate for the first time since 2015. However, analysts predict a more modest but firmer stream of support measures in the next few months.
The Shanghai “Nifty 50” stock index dropped about 0.8 percent after the lackluster data, which added to the dampened mood on global financial markets.
The speed of fixed asset investing was the weakest on record since way back early 1996, based on data. Investment had been seen to grow 6.0 percent in the first seven months of this year, firm from January to June.
In July, fixed asset investment expanded 3.0 percent compared to the year earlier.
Retails shares similarly failed to hit expectations. Chinese consumers have been more hesitant to spend on everything from cosmetics to other staple goods to big-ticket items like home appliance and furniture.
Sales gained 8.8 percent in July from a year earlier, lower than the expected 9.1 percent and lower from 9.0 percent in June, in spite of the huge import tax cut that was implemented last month.