Chinas Growth Slows as Trade War Continues

Wed, 23rd Jan 2019

Last year saw the Chinese economy grow at its poorest annual pace in 28 years, as the ongoing pressure of the trade war with the United States showed its effects. The government is now under heavy pressure to reach a deal with Washington, as well as to find ways to stimulate the economy to avoid further slowdowns.

Full year GDP growth is down to 6.6 percent, which is the worst since 1990. While this is in line with what analysts had expected, it is poorer than 2017, which saw growth of 6.8 percent. The economy showed most of its troubles towards the end of the year, with the fourth quarter’s growth being just 6.4 percent.

This could be bad news for many firms in the FTSE 100, in particular mining companies, because China is the world’s biggest consumer of basic materials and slowing growth is likely to mean slowing demand for metals.

The effects of the bad news from China as well as other disappointing figures from the International Monetary Fund have already been felt across Europe and Asia. The IMF trimmed its economic forecasts, and the global markets responded with a downward slide. The German DAX and French CAC 40 slipped by 0.4 percent, while the FTSE 100 slipped by 1 percent. The US markets got off to a weak start also.

European investors perhaps have more to fear, as the Brexit talks are still ongoing and there is still very little clarity as to what sort of deal, if any, could be approved in parliament.

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