FxWirePro: Chinese economy signals slowdown amid trade war with United States

Trade war effect or not, China’s economy is showing signs of a further slowdown amid the trade friction with the United States. Check these facts out,

• China’s retail sales growth rate is still declining. In September growth was 9.2 percent y/y, much lower than 17 percent in 2011, and lower than last years' above 10 percent.
• China’s official manufacturing PMI declined to 50.2 in October, the worst reading since July 2016, when it was declining and finally dropped below 50 or the contraction zone. Details showed that new orders declining with export sales contracting for the 5th straight month.
• Industrial production growth stands at 5.8 percent y/y, which is the weakest since February 2016.  

This is happening at a time when the Chinese government’s budget deficit has hit 3.8 percent, the lowest ever recorded. It is also important to note that China’s debt to GDP ratio is rising fast and likely to cross 50 percent of GDP by next year, the highest ever.

Recently, it has come to notice the dire condition of China’s fastest growing automobile market. Sales are down 11.7 percent in October from a year ago. Sales have now declined for a fifth straight month.

We believe a deal with the United States will lead to an economic rebound, as the aim of the Trump administration in the United States has always been to reduce the trade deficit significantly, which was $375 billion in 2017.