Growth in China’s economy has slipped to the lowest rate since 2016.
Which isn’t huge negative news except that Chinese financial markets are already nervous enough to have pushed Chinese stocks into a bear market.
In the second quarter of 2018 annual growth rose by “just” 6.7%. That’s slightly lower than the 6.8% annual growth rate in the first quarter.
It is, I’d note, within the “above 6.5%” target zone set by Beijing for the year.
Other numbers announced over the weekend add to the picture of slightly slower growth. For example, industrial output grew by 6.7% year over year in June, down from 6.9% in May. Retail sales, though, were up by 9% year over year from 8.5% in May.
The slowdown seems to be a response to tighter monetary policy from the People’s Bank, which has urged banks to slow lending to local governments, and a continued crackdown on shadow lending.
That’s good news, on the one hand, since it means that the slowdown is intentional and what can be created by a change in policy can be fixed by a change in policy.
On the other hand, it’s bad news since the numbers don’t yet reflect any of the effects of the current tariff war between the United States and China. Any slowing from that battle is a matter for the third quarter and beyond.
The Shanghai Composite Index was down another 0.61% in overnight trading. The index is now down 12.67% for 2018 to date and has tumbled 20.9% into bear territory since the high on January 26.
The iShares MSCI Emerging Markets ETF (EEM) shows emerging markets, which get worried when China’s growth slows since China is the driver for global markets in many developing country commodities and manufactured goods (especially sub-assemblies for tech goods), down 0.56% as of 1:30 a.m. New York time today and this ETF is now down 7.47% year to date.
