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Economy

China growth slows to 27-year low in second quarter

New stimulus speculation rises as trade war caps GDP increase at 6.2%

People work on a truck assembly line in China's Anhui Province on July 12.

SHANGHAI -- China's economic growth pace slowed to 6.2% annually between April and June, down from 6.4% in the first quarter, as the country's trade war with the U.S. weighed down manufacturing output.

The pace of quarterly growth was the slowest China has seen since 1992.

The reading, which confirmed the median 6.2% projected by economists polled by Nikkei last week, also reflected marginal growth in retail sales and fixed asset investment.

In the first half of 2019, China's gross domestic product expanded 6.3%, down 0.5 percentage point from the same period last year, according to a preliminary projection released by the National Bureau of Statistics on Monday.

While citing the growth as within a reasonable range, the bureau warned of "new downward pressure" amid increasing external uncertainties.

Industrial production increased 6% in the first half, 0.5 percentage point slower than in the first quarter alone. Across different sectors, growth was recorded in mining, at 3.5%, and manufacturing, with a 6.4% gain.

Sales of consumer products grew 8.4% in the first half, 0.1 percentage point faster than in the first quarter, while fixed assets investment was up 5.8%, 0.5 point slower than the first quarter.

Research company Capital Economics said the improvement in retail sales was partly due to one-off gains in auto sales ahead of new emissions standards put into force in June. The company said it expected construction activity to remain subdued.

"Combined with increasing headwinds from U.S. tariffs and weaker global growth, we expect this to culminate in a further slowdown in economic growth over the coming year," added economist Julian Evans-Pritchard. As a result, he said, Beijing may need to introduce further stimulus measures to meet its full-year GDP growth target of between 6% and 6.5%.

New investment by the private sector, especially in manufacturing, will be held back by the unresolved trade tensions with the U.S., the Economist Intelligence Unit said. Any additional stimulus measures will make subsequent policy tightening all the more challenging, the research company said.

Chinese officials argued that first-half growth has laid a good foundation for achieving the full-year target despite global uncertainties.

"There is much room for policy measures as the domestic market is still expanding," said Mao Shengyong, a spokesman for the statistics bureau.

Some economists ruled out any significant change in policy measures. Zhu Haibin of J.P. Morgan said that despite weaker headline readings, China will meet its growth target. The likelihood of a cut to benchmark interest rates is "very low" and further policy easing will be marginal and gradual, the economist said, citing possible incentives for home appliance sales as an example.

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