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Economy

China's growth weakens further to 6.0% in third quarter

Trade war with US and African swine flu play big roles in stifling expansion

Rising inflation and weaker consumer spending are also tugging at China's economy. (Photo by Ken Kobayashi)

SHANGHAI -- China's growth rate slowed further to a record low of 6.0% for the July-September quarter as added U.S. tariffs punished the economy, according to preliminary figures released by the National Bureau of Statistics on Friday.

The previous quarter's 6.2% growth had been China's slowest since 1992, when the country first began reporting quarterly growth data. The figure is lower than the 6.1% median forecast from 20 economists polled by Nikkei and Nikkei Quick News last week.

But the bureau was cautiously optimistic for the future, saying recent data on manufacturing and infrastructure investment were "favorable" to growth on top of a relative low base in the final quarter of last year.

"I feel the economy is guaranteed to remain stable in the fourth quarter," said Mao Shengyong, a bureau spokesperson.

The government has projected an increase of gross domestic product between 6% and 6.5% for the year.

The ongoing trade war with the U.S. again hampered the economy. During the quarter, exports contracted 0.4% as the U.S. on Sept. 1 began imposing an additional 15% tariff on $110 billion worth of consumer goods. Imports declined 6.5%.

The tariff followed a 25% levy on some $250 billion worth of goods, including toys, that Washington began imposing last year. Shipments of toys and sports equipment fell 0.6% in the first half of this year. In the year-earlier period, they grew 13%.

"We hope the trade war will be gone in one or two years," said Julian van Gemeren, vice chairman of Micro Mobility. The Swiss company, which produces scooters and bags in China before shipping them around the world, operates in sectors that have been negatively affected by the trade war.

Beijing and Washington recently reached a "phase 1" deal to avert a further escalation of tensions, but the absence of a comprehensive solution as well as global uncertainty are still clouding China's economic outlook.

As for domestic pressures, rising inflation and weaker consumer spending are weighing on growth. An outbreak of African swine flu has been a key culprit, greatly increasing the price of pork, a staple meat in China. The situation has been pushing up the consumer price index, which rose 3% in September, the highest since November 2013. In August, the index increased 2.8%.

During the first three quarters, lower spending on vehicles and jewelry weighed on retail sales, which grew 8.2%, down from the 9.3% recorded over the same period last year.

Analysts say the government's macro stimulus policies, which include allowing financial institutions to trim the reserves they must keep on hand, were inadequate.

"We are cautious about the outlook for investment growth, since China's property developers are facing tighter restrictions on fundraising, dampening investment activity," said Zhu Chaoping of J.P. Morgan Asset Management.

Zhu added that investors will be looking for signs of further stimulus after a key meeting of China's Communist Party at the end of the month.

Oxford Economics also predicts in a note that the growth will "moderate further in [the fourth quarter] and into 2020 amid soft domestic demand and a gloomy external environment."

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