What China's low industrial output means for its economy

In China, the country has been suffering from a low industrial output, which is in fact the lowest in 17 years. The reason? This is thanks to a combination of the ongoing trade war with the United States as well as a cyclical slowdown, according to Bloomberg.

For example, the recent economic data from July illustrates the difficult economic outlook. “Industrial output rose 4.8% from a year earlier, retail sales expanded 7.6%, and fixed-asset investment slowed to 5.7% in the first seven months,” according to the article. “While some seasonal effects likely compressed the data, all results were lower than forecast by economists in a Bloomberg survey.”

As the article suggests, the world’s second-largest economy is struggling, although news that U.S. President Donald Trump would postpone some tariffs did help slightly. However, that’s little resolution for some companies in China that are already being heavily affected by the trade tensions, which show little end in sight currently (even after a year of escalations).

“The economy is facing strong headwinds and decelerating,’’ said Gene Ma, chief China economist at the Institute of International Finance in Washington, in an interview with Bloomberg. “More targeted monetary and credit easing are needed. We expect some sort of interest rate cut in the fall.’’

Along with these worrying signs for China, the International Monetary Fund released a report earlier in August emphasizing just how dramatically the trade war has been affecting the country’s economy, according to CNBC. The report, for example, stated that a “comprehensive” trade agreement should take place as soon as possible to avoid “undermining the international system.”

“China and its trading partners should work cooperatively and constructively to settle their disputes in a rules-based multilateral framework and make joint efforts to reform the WTO in a good faith and win-win approach,” Jin Zhongxia, executive director for China at the IMF, said in a press release. “That is not only good for China and the U.S., but also for the international community as a whole.”

Meanwhile, the economic issues impacting China showed themselves when the country’s GDP growth went to just 6.6% last year and is expected to slow further to 6.2% this year, according to the CNBC article. “While a moderate slowdown is expected in 2019, uncertainty around trade tensions remains high and risks are tilted to the downside,” according to the IMF.

In sum, China’s industrial output and GDP growth are both showing signs of weakness thanks in large part to the ongoing trade disputes with the U.S.