Economic Strength In China Paralyzed As Trade War Forges Ahead

High unemployment combined with weak production and consumption point to an ever-slowing economy in China as the trade war with the U.S. continues, The Wall Street Journal reported on Wednesday (Aug. 14).

China’s industrial productivity is at its slowest pace since 2009 as weakening market confidence forces manufacturers to reduce both production and investment while consumers reel in spending. Economic growth in the second quarter is at its lowest point — 6.2 percent — in nearly three decades. In addition, urban unemployment increased to 5.3 percent in July, equal to February’s record high.

“The cooling of economic activity last month was even worse than that of 2008 when industrial production was hit by the global financial crisis, while domestic consumption remained strong,” Zhaopeng Xing, an economist with ANZ, told the WSJ.

The world’s second-largest economy will need additional stimulus to keep growth on pace with goals set by Chinese leaders, Xing added.

The U.S. shelved additional tariffs until Dec. 15 in light of the upcoming holiday shopping season, giving Chinese exporters some breathing room. Xing told the WSJ that the decision will help keep exporters afloat in the coming months.

“Today’s data demonstrated that the Chinese economy faces increased downward pressure that hasn’t been alleviated by the previous stimulus policies,” Shuang Ding, an economist with Standard Chartered, told the news outlet. He added that he expects China’s central bank will reduce interest rates.

Earlier in July, the U.S. removed certain restrictions on Huawei Technologies Co. American firms could now ship goods to Huawei after the company was placed on a blacklist that prevented suppliers from selling U.S.-origin technology to Huawei without government approval.

This reprieve has been criticized by both Democrats and Republicans who see Huawei as a national security threat. Secretary of State Mike Pompeo, Federal Communications Commission Chairman Ajit Pai and others have voiced their concerns about the company.


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