Chinese economic growth falls to 6.2% as global slowdown bites

Gold prices fall, silver follows suit

China GDP Growth Steadies at 6.4% in First Quarter.

The slowdown underlines the pressure that Chinese policy makers face as they attempt to negotiate a deal with the US on trade, while the economy takes another step down in the long-term deceleration from the heady expansion of the mid-2000s.

Growth in retail sales slowed to 8.4% in the first half of 2019, down 0.1 percentage points from the first quarter, the government reported.

Analysts expect Beijing to unveil more stimulus measures to boost the economy, including possible interest rate cuts by the country's central bank, the People's Bank of China.

But the growth rate was 0.5 percentage points lower than that recorded in the first quarter of the year, it said.

Other economic indicators, however, surpassed market expectations.

Cutting banks' reserve requirement ratios (RRR) "is still very likely as the authorities want to support the real economy in the long run", he said, predicting the economy would continue to slow before stabilising around mid-2020.

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Beijing has leaned largely on fiscal stimulus to underpin growth this year, announcing massive tax cuts worth almost 2 trillion yuan ($US291 billion) and a quota of 2.15 trillion yuan for special bond issuance by local governments aimed at boosting infrastructure construction.

"As such risk assets will respond favourably but it's hard to escape the economic realities that the US-China trade war is having on global economies".

Despite the trade dispute, net exports accounted for a striking 20.7% of the first-half GDP growth, as Chinese exporters had rushed to sell ahead of higher US tariffs and imports had weakened more sharply amid sagging domestic demand.

"A stronger end to the quarter didn't prevent growth from slowing in Q2 and we see more weakness on the horizon", economists with research firm Capital Economics said in a note.

The dollar index fell for three days in a row on prospects of an interest rate cut by the U.S. Federal Reserve later this month. However, higher frequency Chinese data for June released at the same time looked far better, with industrial production up 6.3% y/y (market 5.2% y/y), retail sales up 9.8% y/y (market 8.5%) and fixed assets investment up 5.8% YTD y/y (market 5.5%).

"Uncertainty caused by the US-China trade war was an important factor and we think this will persist", said Tom Rafferty, principal economist, China at The Economist Intelligence Unit. Sales of automobiles surged 17.2% in the month, accelerating from a 2.1% gain in May. Property development investment slowed for a second month in June, dragging down the growth of newly started property construction and inventory.

On a yearly basis, average new home prices in China's 70 major cities rose 10.3% in June, compared with a 10.7% gain in May.

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