China's real gross domestic product for the July-September period grew just 6.5 percent from the same period a year earlier. The figure, representing the lowest level of growth in about 9 1/2 years, is a sign of economic deceleration amid an intensifying trade war with the United States, and a downswing could have implications for the global economy.
Each time the administration of U.S. President Donald Trump has imposed sanctions targeting China, Beijing has responded with additional tariffs on U.S. goods. Since July, it has imposed a 25 percent additional tariff on imported American vehicles. As U.S. automakers have already boosted production of vehicles inside China, the additional sanctions have only hit some models. However, consumers in China have shied away from purchasing American cars in general, with one dealership in Beijing reporting a "significant drop" in the number of customers.
The trend, however, is not limited to American vehicles. With uncertainty remaining over the future of the economy amid the trade war with the U.S., sales of new vehicles have dropped in China, and there is speculation that sales for 2018 could drop below the previous year's figure.
Another target China has picked for retaliation is soybeans. Bloomberg News reported that businesses in China have been cancelling purchases of U.S. soybeans. This move hits soybean farmers in the U.S., who form part of Donald Trump's support base. This, however, could also hurt the Chinese economy, as soybeans are needed for processed food products and for animal feed, among other uses, and increased soybean prices would contribute to higher commodity prices in China. A mistake in this strategy could directly hit consumers in the pocketbook, stirring a public backlash.
Chinese vice premier Liu He stressed in an Oct. 19 interview with three major media outlets that necessary measures would be taken to stabilize the Chinese economy. That morning Yi Gang, governor of the People's Bank of China, and Guo Shuqing, chairman of the China Banking Regulatory Commission, took the rare step of verbally intervening to prevent stock price declines.
The Chinese government had moved to curb public spending amid an increase in corporate and local government debt, but since Trump's first round of sanctions in July it has been stimulating the economy with projects such as subway and expressway construction, and the issue of debt is likely to rise again.
Following a global drop in stock prices on Oct. 11 amid concerns of a rise in long-term interest rates in the United States, stock markets around the world appeared to be stabilizing, but at one point on Oct. 19 Japan's benchmark Nikkei 225 index shed 400 points over concerns about the future of the Chinese economy. Shanghai stocks, meanwhile, have dropped over 20 percent since March and are hovering at their lowest level in nearly four years.
In the meantime, there are no signs that China and the U.S. are getting close to an end to the trade conflict. Naoto Saito, an economic researcher at Daiwa Institute of Research Ltd., commented, "Expansion of the trade war could hit the Chinese and U.S. economies, and deceleration of the Chinese economy could become drawn out."
(Japanese original by Kiyohiro Akama, China General Bureau, and Mamoru Ohara, Business News Department)