China’s GDP growth seen slowing to 6.2% in second quarter

The tariffs on shipments to the US are having an impact on China’s economy, an economist said. (AFP)
Updated 12 July 2019

China’s GDP growth seen slowing to 6.2% in second quarter

  • Beijing stepped up support for the economy but the moves have not been enough to offset a domestic slowdown and softening overseas demand
  • China’s 1.3 billion consumers remain a bright spot

BEIJING: China’s economy grew at its slowest rate in nearly three decades in the second quarter, according to an AFP survey of analysts, hit by the US-China trade war and weakening global demand.
The world’s second largest economy expanded 6.2 percent in April-June, the poll of 10 economists predicted ahead of the official release of gross domestic product figures Monday.
The reading would mark the worst quarterly growth in almost three decades but stay within the government’s target range of 6.0-6.5 percent for the whole year. The economy grew 6.6 percent in 2018.
Beijing has stepped up support for the economy this year but the moves have not been enough to offset a domestic slowdown and softening overseas demand for its toys, gadgets and electronics.
Policymakers are likely to take further action, analysts say, with Premier Li Keqiang presiding over a state council meeting Wednesday that pledged to lower tariffs and step up tax rebates for exporters.
“The existing tariffs on exports to the US are having an impact on China’s economy,” said Steven Cochrane, chief APAC economist with Moody’s Analytics.
“Industrial production and exports are also weak, with shipments to the US declining significantly,” he said.
Beijing pushed forward a raft of stimulus measures earlier this year to cushion the impact from its cooling economy, increasing spending on roads, railways and other big-ticket infrastructure projects, and tax cuts worth 2 trillion yuan ($297 billion) kicking in from April.
The policies buoyed the economy in March and brought in 6.4 percent growth for the first quarter, but it proved no more than a short-term panacea.
Industrial output surged 8.5 percent in March before tumbling in April and dropping to five percent growth in May, the slowest increase since 2002.
The build in infrastructure investment has also retreated from the first quarter, coming in at 4.0 percent in January-May, sharply down from years of near 20 percent expansion.
China’s 1.3 billion consumers have remained a bright spot.
“Consumption is holding up relatively well, possibly reflecting the effects of income and value-added tax cuts,” said Tommy Wu of Oxford Economics.
Sales of big-ticket items such as cars have not held up, though, with sales down 12.4 percent in the first half of the year, according to the China Association of Automobile Manufacturers.
Analysts widely expect Beijing will step up with further easing in coming months, with Cochrane tipping new measures heading into 2020.
“This will include lower real interest rates for small firms, further reserve requirement ratio reductions, and ongoing infrastructure spending,” he said.
The overall downward trend gives President Xi Jinping little room to fight back forcefully against the US, which is using tariffs as leverage to try to force China into opening up its economy.
Washington and Beijing have hit each other with punitive tariffs covering more than $360 billion in two-way trade and damaging manufacturers on both sides of the Pacific.
US President Donald Trump and Xi agreed to revive negotiations when they met on the sidelines of the G20 summit in Japan on June 29.
Top US and Chinese negotiators held phone talks on Tuesday but it remains unclear if the wide rupture that has formed since talks broke down in May can be patched over.
On Thursday Trump raised eyebrows with a tweet accusing China of not fulfilling a pledge to buy more agricultural goods, adding: “Hopefully they will start soon!”
Björn Giesbergen of RaboResearch said “we are currently in a stable, unstable equilibrium” with the US-China trade war.
“Ultimately we believe it will be impossible to reach a long-lasting deal. As such, the question is not if tensions will flare up again, but rather when,” he said.


Oman said to mull new regional airline

Updated 6 min 36 sec ago

Oman said to mull new regional airline

DUBAI: Oman is considering setting up a new regional airline that could take over domestic operations from state carrier Oman Air, two sources familiar with the matter told Reuters.

A request for proposal was issued this month by state entity Oman Aviation Group for a feasibility study into operating the new airline, “Oman Link,” the sources said.

Setting up a new airline for domestic flights would allow Oman Air to focus on its international network where it competes with large Gulf carriers Emirates, Qatar Airways, and Etihad Airways.

The new airline could partner with Oman Air with both carriers connecting passengers to each other but would have its own independent management, the sources said on the condition of anonymity because the details are private.

Proposals are to be submitted by Nov. 11, one of the sources said.

The new airline would use regional jets for domestic flights and potentially later to other cities in the region where there is not enough demand to fill the larger single aisle jets used by other airlines in Oman.

FASTFACT

Oman Air operates flights to four airports in the country, including the main Muscat International.

Oman Aviation Group and its unit Oman Air did not respond to separate emailed requests for comment.

Oman Air operates flights to four airports in the country, including the main Muscat International, according to its website.

The airline uses 166-seat Boeing 737 jets and 71-seat Embraer E175 aircraft on domestic and regional flights.

Both aircraft types are too costly to consistently operate domestic routes at a profit, according to industry sources.

Oman has been restructuring its aviation sector in recent years. Oman Aviation Group was formed in 2018 and includes Oman Air, Oman Airports and Oman Aviation Services.

A budget, second airline, Salam Air, was launched in 2017. It is owned by Omani government pension funds and the Muscat municipality.

Last week, Eithad and Air Arabia said they were jointly setting up a low cost carrier in Abu Dhabi.