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China warns on trade war as economy slows

8:30 am, 16th July 2018

The world’s second-largest economy said gross domestic product (GDP) rose at an annual rate of 6.7% in the second quarter of 2018 – slightly down on the 6.8% registered between January and March.

It was explained by the authorities on factory output growth weakening to a two-year low, with demand at home and abroad falling.

The drop also continued to reflect the crackdown on risky corporate lending which has driven up borrowing costs over the past few years, despite further central bank support for lenders.

Officials indicated China was on track to meet its 2018 GDP growth target of 6.5% but admitted there was a risk of harm from a deepening trade war with the US.

Spokesman for China’s national statistics bureau, Mao Shengyong, said: “World trade protectionism continues to heat up, posing a major challenge to the world economic recovery and adding challenges and uncertainties for us.”

Washington and Beijing have already imposed tit-for-tat tariffs on $34bn (£25.6bn) of goods but the US raised the stakes last week by threatening to impose extra charges on another $200bn (£151bn) worth of goods.

China has already indicated it would respond in kind though Mao added that such measures “will have an impact on the economies of both China and the United States, and now that the world economy is deeply integrated, and the industrial chain is globalised, many related countries will also be affected.”

The US has separately imposed tariffs on steel and aluminium imports from Canada, Mexico and the EU at a time when the British government is also battling itself over the country’s future trading relationship with Brussels after Brexit.

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The release of China’s economic figures came as top EU officials were in Beijing for annual talks.

European Council president Donald Tusk told reporters that the trade tensions could spiral into a “hot conflict” unless resolutions were found.

Stock markets fell on the back of the data with China’s Shanghai Composite losing ground after a positive start to the session.

Commenting on the figures Alaistair Chan of Moody’s told the AFP news agency: “China’s economy appears to be on a slowing path.

“The government seems to be easing policy gently… despite its goal of minimising financial risks.

“Trade disputes with the US have hurt market sentiment, and investment is also cooling,” he concluded.