China's growth slowed to its weakest pace in almost three decades in the second quarter, with the Sino-US trade war and weakening global demand weighing on the world’s number-two economy, official data showed on Monday.

The slowing economy makes it more difficult for President Xi Jinping to fight back forcefully against Washington – which is using tariffs as leverage to try to force Beijing into opening up its economy.

The 6.2 per cent figure released by the National Bureau of Statistics (NBS) was in line with a survey of analysts by AFP and down from a 6.4 per cent expansion in the first quarter.

The gross domestic product (GDP) figures are within the government’s target range of 6.0-6.5 per cent for the whole year, down from the 6.6 per cent growth China put up last year.

“Economic conditions are still severe both at home and abroad, global economic growth is slowing down and the external instabilities and uncertainties are increasing,” said NBS spokesman Mao Shengyong.

“The economy is under new downward pressure.”

Beijing has introduced measures including a massive tax cut to boost the economy, but they have not been enough to offset a domestic slowdown and softening overseas demand – made worse by a punishing trade war with its biggest trading partner country, the US.

Total exports rose only 0.1 per cent year-on-year during the first six months.

Analysts widely expect Beijing will step up support in the coming months. Mao told journalists: “There is still much room for policy manoeuvring.”

Monetary easing is expected to help boost the economy, and the central bank on Monday finalised a previously announced cut to the amount of cash that small- and medium-sized banks hold in reserve.

With this year marking the 70th anniversary of the People’s Republic of China founding, politics necessitates healthy growth, said ANZ Bank’s Raymond Yeung.

“The Chinese government will not allow the quarterly growth to fall below 6.0 [per cent],” he said in a note.

Bright spots

The month of June held bright spots for the economy.

Industrial output rose 6.3 per cent, from 5.0 per cent in May, which was the slowest increase since 2002.

Fixed-asset investment also picked up, rising 5.8 per cent year-on-year in January-June, from 5.6 per cent in January-May.

China’s 1.3 billion consumers continued to open their wallets, with retail sales growing 9.8 per cent year-on-year in June, up from 8.6 per cent in May.

“A stronger end to the quarter didn’t prevent growth from slowing in [the second quarter] and we see more weakness on the horizon,” said Capital Economics’ Julian Evans-Pritchard in a note.

‘Economic realities’

Sales of big-ticket items such as cars have not held up, with sales down 12.4 per cent in the first half of the year, according to the China Association of Automobile Manufacturers.

And growth in infrastructure investment has retreated from years of near 20 per cent expansion – coming in at a 4.1 per cent rise in January-June.

Imports and exports also both shrank in June, while the urban unemployment rate ticked up to 5.1 per cent for the month.

Meanwhile, extreme weather and highly contagious African swine fever have sent food prices skyrocketing, especially for meat, with the size of the world’s largest pig herd down 15 per cent in the first half of the year.

The trade war with the US has hit demand for China’s goods, compounding slowing demand from the rest of the world.

“It’s hard to escape the economic realities that the US-China trade war is having on global economies,” said Vanguard Markets managing partner Stephen Innes.

Altogether the two economic giants have slapped each other with punitive tariffs covering more than $360 billion in two-way trade, damaging manufacturers on both sides of the Pacific.

It helped push China’s manufacturing activity into contraction last month and its exports to the US dropped more than eight per cent over the first half of the year.

High-level trade talks to resolve the issues resumed this month, but the gulf between the two sides remains wide.

China on Friday said it would impose sanctions on US companies involved in a potential arms sale worth $2.2 billion to self-ruled Taiwan.