China Slows Down

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What's going on?

China’s economic growth slowed to its lowest rate since 2016 on Monday, sending the country’s stocks down by 1%.

What does this mean?

In the second quarter of 2018, China’s economy grew by 6.7%. Investors expected this, but it was a slight slowdown from 6.8% growth in the first quarter of the year (which exceeded expectations).

The Chinese government’s taken steps to lower the amount of borrowing the country’s doing – as a result, there’s been less dosh for companies to slosh on things like property investment. However, consumers have come to the rescue. They spent 9.4% more than the same time last year, showing that China’s plan to shift to a consumption and service-led economy from a more industrialized one seems to be working.

Why should I care?

For markets: Investors in Chinese stocks are likely worried about growth slowing in the future.

Investors in Chinese stocks were selling them on Monday, possibly worried that economic growth would continue to fall – there’s less debt available to spur companies to invest in driving future growth, and the US-China trade war might lower growth by as much as 0.3% this year (China’s expected to grow its economy by 6.5% overall in 2018). It could have knock-on effects on other countries, too. China’s a major buyer of products around the world, and lower growth would probably reduce demand for products that it buys on the world stage (like oil, copper and machinery).

The bigger picture: China complained to the World Trade Organization (WTO) about potential tariffs.

On Monday, China filed a complaint with the WTO about potential import taxes (a.k.a. tariffs) that the US might introduce on Chinese products worth $200 billion. The WTO oversees trading rules between nations, so China’s hoping it’ll also see the US tariffs as unfair. This could force the US to slow or reverse tariff decisions, and pave the way to further negotiations.

Originally posted as part of the Finimize daily email.

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