Zürcher Nachrichten - China's economy grows 5.2% on trade war truce

The country's leadership is fighting a multi-front battle to sustain growth, a challenge made more difficult by Donald Trump's tariff campaign.

The US president has imposed tolls on China and most other major trading partners since returning to office in January, threatening Beijing's exports just as it becomes more reliant on them to stimulate economic activity.

The two superpowers have sought to de-escalate their trade spat after reaching a framework for a deal at talks in London last month, but observers warn of lingering uncertainty.

Trump upped the ante on Monday, warning Russia's trading partners -- which include China -- that he will impose "very severe" tariffs reaching 100 percent if Moscow fails to end its war on Ukraine within 50 days.

Western nations have repeatedly urged China -- a key commercial ally of Russia -- to wield its influence and get Vladimir Putin to stop his three-year-old war with Ukraine.

Official data on Tuesday showed the Chinese economy grew 5.2 percent in April-June, matching a prediction by an AFP survey of analysts.

But retail sales rose 4.8 percent on-year, below the 5.3 percent forecast in a Bloomberg survey of economists, suggesting efforts to kickstart consumption have fallen flat.

However, factory output gained 6.8 percent, higher than the 5.6 percent estimate.

"The national economy withstood pressure and made steady improvement despite challenges," National Bureau of Statistics (NBS) deputy director Sheng Laiyun told a news conference.

"Production and demand grew steadily, employment was generally stable, household income continued to increase, new growth drivers witnessed robust development, and high-quality development made new strides," he said.

- Optimism -

Data from the General Administration of Customs on Monday showed exports rose much more than expected in June, helped by the US-China trade truce.

Imports also rose 1.1 percent, higher than the 0.3 percent gain predicted and marking the first growth this year.

Customs official Wang Lingjun told a news conference on Monday that Beijing hoped "the US will continue to work together with China towards the same direction", state broadcaster CCTV reported.

The tariff truce was "hard won", Wang said.

"There is no way out through blackmail and coercion. Dialogue and cooperation are the right path," he said.

However, many analysts are anticipating slower growth in the next six months of the year, with persistently sluggish domestic demand proving a key drag.

Data released last week showed that consumer prices edged up in June, barely snapping a four-month deflationary dip, but factory gate prices dropped at their fastest clip in nearly two years.

The producer price index, which measures the price of wholesale goods as they leave the factory, declined 3.6 percent year-on-year last month, extending a years-long negative run.

Economists argue that China needs to shift towards a growth model propelled more by domestic consumption than the traditional key drivers of infrastructure investment, manufacturing and exports.

Beijing has introduced a slew of measures since last year in a bid to boost spending, including a consumer goods trade-in subsidy scheme that briefly lifted retail activity.

B.Brunner--NZN