After a strong start to the year with better-than-expected growth in the first quarter, the Chinese economy is expected to post its weakest growth rate in over two decades in the second quarter of 2019, as a combination of factors from punitive US tariffs to domestic cyclical downward pressure kicked in.
The world's second-largest economy is likely to have grown by 6.3 percent from a year earlier in the second quarter of 2019, according to several Chinese economists interviewed by the Global Times. However, a Reuters' poll forecast a 6.2 percent growth in the period, which would be the slowest pace in 27 years.
The National Bureau of Statistics (NBS) is scheduled to release its second quarter GDP and other economic data on Monday.
In the first quarter, China's GDP growth of 6.4 percent year-on-year, beat most analysts' expectations. Chinese policymakers have set a target growth range of between 6 and 6.5 percent for the full year.
"The downward pressure appears much more pronounced in the second quarter of the year because of trade pressure," Li Daxiao, chief economist at Shenzhen-based Yingda Securities, told the Global Times on Sunday. "Overall, the second quarter has been very tough for foreign trade and the manufacturing sector.
In the first half of the year, China's exports grew by a mere 0.1 percent year-on-year to $1.17 trillion and imports dropped 4.3 percent year-on-year to around $990 billion, resulting in a trade surplus of $181.2 billion, according to data released by the General Administration of Customs (GAC) on Friday.
Although China's trade surplus expanded significantly during the period, it is "not healthy" because it resulted from a sharp decline in imports, said Tian Yun, vice president of the Beijing Economic Operation Association. "It shows that our internal demand lacks growth momentum," he told the Global Times.
The trade war between China and the US is inflicting rising pain on both economies. In the first half year, China's exports to the US dropped 8.1 percent year-on-year and imports from the US dropped 29.9 percent, while China's trade with many other partners grew or fell only slightly, according to the GAC.
Lu Ting, Chief China economist with Japanese financial firm Nomura, said that if the trade war continues to escalate, it could create more difficulties for China's export market and GDP growth.
"Don't underestimate the impact of the trade war on [China's] trade. The impact on China is bigger than the impact on the US," he told the Global Times, noting the biggest impact is on the manufacturing sector.
In June, China's manufacturing purchasing managers' index (PMI), a gauge of factory activity, remained in contraction for a second month, at 49.4, unchanged from May.
A PMI reading below 50 points to contraction and one above shows expansion.
However, both Li and Tian estimated that the Chinese economy has still grown by 6.3 percent in the second quarter, a relatively optimistic forecast, arguing that robust stimulus measures have stabilized infrastructure investment and consumption.
"There is no-doubt that the government's measures have helped cushion some of that pressure and improved business confidence," Li said, adding that more stimulus is expected in the second half of the year.
China has undertaken an array of stimulus measures, including administrative fees and tax cuts for companies that amount to 2 trillion yuan ($291.05 billion), increased spending in infrastructure and more financing for small and medium-sized enterprises. Chinese policymakers have in recent weeks signaled that they could also adjust monetary and fiscal policies to back up the economy, with officials saying that there is still room for adjustment.
"I think the most important thing for Chinese economy going forward is to boost confidence and spur private investment," Tian said, noting that more targeted measures might be required.