What's Really Behind China's Economic Slowdown?

China's second quarter growth was only 6.2%, the lowest point since the data started being recorded in 1992.
Posted at 5:15 PM, Jul 15, 2019

China's economic growth slowed to its lowest level in almost three decades in the second quarter of the year, suggesting the country is experiencing the effects of an ongoing trade war with the U.S. 

During that period, China reported a 6.2% growth in GDP from the same time the year before. That's down from 6.4% in the previous quarter and marks the lowest point since the data started being recorded in 1992. 

Chinese officials acknowledged the slowdown as the data was released Monday, saying, "economic conditions are still severe both at home and abroad." 

While most experts point to trade tensions as being largely responsible for the economic dip, it's important to explore the bigger picture. 

The Chinese economy, which is the second largest in the world, has been signaling a slump for months, at least. Analysts had predicted that growth in 2018 would be the weakest it'd been since 1990. 

Chinese consumers appear more cautious about spending. Economists say a host of western companies like Apple, Starbucks and U.S. automakers, have been finding it harder to sell in China.   

And as the New York Times points out, China's economic issues aren't just stemming from trade. The country's financial system has been burdened with debt after a borrowing spree in response to the global financial crisis. 

President Donald Trump weighed in on Monday's report on Twitter, saying the trade war is having a "major effect" on China and will push the country to make a trade deal with the U.S. 

He met with Chinese President Xi Jinping last month at the G-20 summit after monthslong trade negotiations had stalled. Following the meeting, President Trump said negotiations were "back on track" and that China had agreed to buy "a tremendous amount" of U.S. food and agricultural products as a result of the conversation. 

According to National Economic Council Director Larry Kudlow, that's still on the table, even though it's not clear if China officially agreed to those terms. 

"Ambassador Lighthizer and Secretary Mnuchin have both emphasized our expectations that the Chinese will shortly be announcing large-scale purchases of American farm goods and services," said Kudlow. 

Wall Street's been closely watching the health of China's economy and its implications for global growth. While the trade tensions have been worrisome in general, the Chinese GDP data didn't appear to faze investors much. U.S. stocks lingered near their record highs during the day on Monday. 

There's also some positive news out of that report: China's June data came in strong, with retail sales beating expectations and the manufacturing sector also showing growth. 

But June alone may not be a solid indication of what's ahead. As one analyst tells CNN, there could be "more weakness on the horizon." Fortune notes that depending how the rest of the year pans out, June could be an anomaly. 

Additional reporting from Newsy affiliate CNN