China’s downward economic path offers no escape from its trade problems

There were no surprises in China’s GDP figures as the government portrays an economy slipping steadily lower giving little promise of improvement or support for the waning global expansion.

Gross domestic product rose 6% annually in the third quarter slightly less than the median forecast of 6.1% and the second quarter’s 6.2%.

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China’s premier economic statistic has not missed its consensus forecast by more than 0.1% since the first quarter of 2012.  It was the slowest rate of growth since the first three months of 1992, which is the earliest quarterly data available, and before the capitalist endeavor begun by Deng Xiaoping in 1979 had reached takeoff velocity.

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The yuan (CNY) has recovered somewhat from its 11 year low against the dollar of 7.1848 on September 3rd and was trading at 7.0808 in the New York session.

Over the 22 months since President Trump imposed tariffs on solar panels and washing machines in late January 2018 Chinese economic growth has decreased 11.7%, from 6.8% in the first quarter of to its current 6%.

The decline in exports resulting from the trade war with the United States accelerated in September despite the recent deal that headed off higher tariffs on Chinese goods that had been scheduled for October 15^th.  Imports contracted for the fifth month in a row.

The ‘phase one’ deal promised increased agricultural purchases and agreements on intellectual property and financial services by China in exchange for the withdrawal of the planned American tariff increase.  The specifics of the deal are still being negotiated and President Trump has said he hopes it will be signed in the next month or so.

"We'll do a formal signing with President Xi and myself," Mr. Trump said after announcement of the agreement on October 11^th and referring to the meeting of the Asia Pacific Economic Cooperation to be held in Chile in November.

Beijing’s desire to stimulate the economy with loans is being hampered by the high debt load of many corporations from previous credit easing cycles.

The government has set the GDP target range for 2019 at 6.0%-6.5%.  At 6.2% through the first three quarters GDP for the year is almost certain to been within the projection.   

Industrial output on the mainland rose 5.8% in September, beating the 5% estimate and August’s seventeen year low of 4.4%.

Retail sales climbed 7.8% as predicted after the 7.5% increase in August. Fixed asset investment on the year to date in September was 5.4%, higher than a year earliera and down slightly from August’s 5.5% pace.