China’s growth at slowest pace in 27 years, but consumers unfazed

China’s economy grew at its weakest pace in almost three decades in Q2, according to figures released by the National Bureau of Statistics.

The world’s second largest economy grew at 6.2 per cent year-on-year, a decline from the 6.4 per cent in the first quarter of 2019. This is the country’s slowest growth rate since the bureau began publishing GDP data in 1992.

According to the South China Morning Post, exports proved to be the main drag on growth. Continued weakness in exports could prompt further action by the Chinese government, Straits Times reports, and Chinese Premier Li Keqiang has already lowered tariffs and increased tax rebates in a bid to support exporters.

The figures have prompted headlines about China feeling the effects of the ongoing US trade war, with President Trump tweeting that US tariffs “are having a major effect on companies wanting to leave China for non-tariffed countries.”

However, there are indications from the data that China is actually likely to be able to withstand a prolonged trade war. This is because domestic growth held up better than expected.

Retail sales grew to 9.8 per cent in June compared to 8.6 per cent in May. The Financial Times suggests that Chinese consumers have, for now, not factored existing trade tensions with the US into purchasing decisions. Tax cuts enacted earlier in the year may have also started to feed through the economy, while industrial output grew 6.3 per cent in June, strengthening from 5 per cent in May. These factors could lead to Chinese growth being more reliant on domestic demand which could, some analysts speculate, offer insulation against US measures.

Related: Asia House in conversation with the Chinese Ambassador to the UK 

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Written by Chern Han Mah, Business and Policy Assistant