China's growth dragged by construction

China's growth dragged by construction

China's economy grew at 6.5 per cent in the third quarter, posting slowest growth in nine years, amid intensifying trade war with the U.S. and the mounting local governments debt which rose to Dollars 2.58 trillion.

Three top Chinese financial regulators spoke in support of local markets on Friday, just ahead of the morning's disappointing gross domestic product report and amid an ongoing stock sell-off.

While it might seem like President Donald Trump is winning his trade war against China, a closer look at the data suggests other factors are to blame for the weak GDP growth. The country is saddled with extraordinary levels of debt so policymakers are reluctant to take measures to stimulate the economy the way they did after 2008. About 11 percent of the Shanghai Index capitalization, $603 billion (4.2 trillion yuan) is listed as collateral for loans, a unsafe practice in a falling market that could force increasing liquidation as share prices drop.

China's blue-chip CSI300 index ended the day up 3 percent and the Shanghai Composite index rose 2.58 percent after slumping to near four-year lows.

On Wall Street, the futures for the Dow Jones Industrial Average and for the Standard & Poor's 500 were both up 0.2 percent.

This saw China retaliate with 10 percent tariffs on $60 billion (£46 billion) of USA imports.

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Data released Friday showed China's economic growth slowed more than expected in the third quarter, as weak industrial output data and the "severe global situation" challenged the government's efforts to stabilize the economy and reach its growth targets.

But Yi also said the country's economic growth would still comfortably reach its full-year target of around 6.5 percent with the possibility of overshooting.

"We doubt the latest pick-up in infrastructure spending will be enough to prevent the economy from cooling further in the coming quarters", said Evans-Pritchard. "Property investment continues to hold up which may provide some support".

The officials tried to ease fears that China was swerving away from pledges of financial reform, and that private enterprises may suffer from a strengthening state hand on the economy, though they announced no major new reform initiatives.

It has reduced its economic bubble, its listed companies are improving, and valuations are at historically low levels, he said, implying that many institutions are paying attention to the Chinese stock market due to its high investment value.

"Downward pressure has increased", Mao said at a news conference.

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"There's been no discernible impact on end demand that we've seen yet from our industry contacts", Vinesh Motwani of Silk Road Research told me, after a recent trip back from Beijing and Shanghai.

Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC) also said the regulator will support the issuance of high-yield bonds and other debt products by small and medium-sized companies.

"Looking ahead, the economic outlook is not optimistic with exports facing further headwinds as US tariffs kick in and demand from emerging countries ebbs".

CNBC notes that many outside experts have expressed skepticism about the reliability of the financial statements of China.

Further fraying market nerves, the European Commission on Thursday said a draft 2019 budget from Italy was in "particularly serious non-compliance" with EU rules, setting the stage for a possible unprecedented rejection of the country's fiscal plan. Early in Asia on Friday, the 10-year yield was higher at 3.1767 percent, compared with a US close of 3.175 percent on Thursday.

The two-year yield, sensitive to expectations of higher Fed fund rates, rose to 2.8824 percent.

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