Sunday 16 September 2018
China's recent trade war with the United States has some investors worried. Photo: Greg Baker/AFP

Uh oh, the Chinese stock market could be in a spot of trouble.

The Chinese economy revealed fresh signs of softness with data showing the pace of investment slowing to record lows while retail spending and industrial production stabilised.

Beijing faces a delicate balancing act, aiming to shift its growth driver away from investment and exports towards personal consumption, while at the same time battling a mountain of debt.

The trade spat with major export destination the United States has complicated the task and sent domestic stock markets tumbling to lows not seen since the 2016 collapse.

US President Donald Trump has threatened to slap higher taxes on every Chinese product coming into the US, though another round of high-level talks could be in the offing.

Trump recently threw cold water on hopes for those negotiations.

China’s National Bureau of Statistics, which released the new data , said the trade spat has had a limited effect on economic data so far.

But it “certainly had an impact” from the perspective of the two countries and their people, said NBS spokesman Mao Shengyong.

“Trade protection has cast a shadow over the recovery of the world economy,” Mao said.

That is slower than the 5.5 percent in January-July, which was the lowest level on record.

China’s cabinet has indicated it will step up support for the economy and quicken infrastructure project approval in coming months but experts do not expect the measures to kick in until next year.

But analysts warned part of the jump could be attributed to higher inflation. The data does “little to change our view that growth remains on a downward trajectory”, said Julian Evans-Pritchard of Capital Economics.

“We think growth will continue to slow in the coming months given that policy stimulus has so far failed to drive a turnaround in infrastructure spending or broader credit growth,” said Evans-Pritchard.

Goldman Sachs predicted even back in June that the situation for China would only get worse.

CNN Money reported that it would be “extremely hard” for the two sides to quickly reach a deal to reform China’s policies on intellectual property, technology transfer and state-owned enterprises.

The lingering uncertainty caused by the trade war threatens to cast a cloud over what is otherwise a strong economy.

Federal Reserve chief Jerome Powell said on Wednesday that concerns in the business world about trade developments are “rising.”

“For the first time, we’re hearing about decisions to postpone investment, postpone hiring, postpone making decisions. That’s a new thing,” Powell said.

Source: AFP, CNN International

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