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A pedestrian walks past Chinese national flags hanging on a street light as residential buildings stand under construction in the background in Shanghai, China.
China’s economic growth likely slowed in the second quarter of 2018 as Beijing cracked down on risky credit amid escalating trade tensions with the U.S.
China watchers will get a reading on that widely held analysis when Beijing posts its official second-quarter GDP growth data at 10 a.m. HK/SIN on Monday.
Analysts polled by Reuters expect second-quarter GDP to have grown 6.7 percent from a year ago, ticking down from 6.8 percent in the first quarter of 2018.
Trade tensions between China and the U.S. have weighed on sentiment, particularly as the property market is slowing in first-tier cities such as Beijing and Shanghai, said Hao Zhou, senior emerging market economist for Asia at Commerzbank.
“I think it’s a little bit tricky at this moment. On the one hand, China commits to financial deleveraging. On the other hand, China sees growth moderation and growth slowdown is a risk for the economy as well,” Zhou said on “The Rundown.”
The situation poses a policy dilemma as the China needs to implement relatively tight monetary policy to force financial deleveraging. However, it also needs easier monetary conditions to support growth.
The People’s Bank of China has already cut banks’ reserve requirements three times this year.
As the risks from the U.S.-China trade war will be a drag on overall growth in the next few years if China’s trade surplus against the U.S. narrows substantially, Beijing is likely to continue easing monetary policy going forward, Zhou said. That is particularly since domestic consumption will slow on escalating trade tensions.
Although Beijing’s official GDP figures are closely watched as an indicator of the health of the world’s second-largest economy, many outside experts have long expressed skepticism about the veracity of China’s reports.
