Trade war: China economy suffers setback

July 15, 2019
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China economy posted the slowest quarterly growth in almost three decades, growing by 6.2% for the second half of 2019, down by 0.2% when compared to the 6.4% recorded in the corresponding period of 2018.

The slow pace of growth posted by China has been attributed to the ongoing trade standoff with the U.S, which has largely affected market expectations. Following China’s slow growth, there are growing concerns over crude oil demand in the global oil market.

Strings of weak economic data in recent months and continuous escalation in the U.S-China trade war have sparked questions on whether the country’s policymakers need to introduce forceful easing to get the economy on a steady growth path.

The slow growth of 6.2% posted on Monday indicated a loss of momentum for the economy from the first quarter’s 6.4%, amid expectations that Beijing needs to do more to boost consumption and investment to restore business confidence.

Data from the country’s Bureau shows that industrial output climbed 6.3% from a year earlier, and rose from the 17-year low recorded in May. Industrial production rose by 6.3% year-on-year in June, up from 5% in May.

Also, investment in the manufacturing sector grew by 3%, while investment in infrastructure also went up by 4.1%. Data shows China has already slashed its Reserve Requirement Ratios (RRR) six times in 2018 to free up funds for lending to the economy.

Meanwhile, Brent Crude Futures fell 21 cents to $66.51 a barrel while U.S. crude was down 28 cents at $59.93 a barrel.

Oil prices have recorded extended gains due to OPEC production cut and growing demands. Last week, both contracts posted their biggest weekly gains in three weeks on cuts in U.S. oil production and diplomatic tensions in the Middle East.

Following China’s slow growth which has affected oil prices in the early hours of today, investors’ sentiments may further be clouded and slow down to further observe policy moves from China which hold oil prices at a standstill or further decline.

In the meantime, Nigeria may count some loses as demand for the country’s oil may slow down due to markets interplay as a result of investors’ sentiments of China’s economy slow down.

On the other hand, Nigeria’s import bill may jack up as China’s policymakers will be looking at stimulating its export strategies to spur growth.

Nigeria’s biggest imports come from China. According to the recent statistics, Nigeria’s highest import in Q1 2019 came from China and it was estimated at N979 billion.

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