China’s growth slows to 6% in third quarter, weakest in 27 years

Cooling domestic demand and the effects of China’s trade with the US have brought an official warning of mounting downward pressure. (AP)
Updated 19 October 2019

China’s growth slows to 6% in third quarter, weakest in 27 years

  • Gross domestic product expanded 6.0 percent in July-September

BEIJING: China’s economy expanded at its slowest rate in nearly three decades during the third quarter as it was hit by the long-running US trade war and cooling domestic demand, data showed Friday, with an official warning of “mounting downward pressure.”

With China a key driver of global growth, the soft reading added to concerns about the world economy and prompted speculation that authorities will unveil fresh stimulus following a series of other recent measures.

Gross domestic product expanded 6.0 percent in July-September, from 6.2 percent in the second quarter, according to the National Bureau of Statistics (NBS).

The reading — in line with an AFP survey of 13 analysts — is the worst quarterly figure since 1992 but within the government’s target range of 6.0-6.5 percent for the whole year. The economy grew 6.6 percent in 2018.

While NBS spokesman Mao Shengyong said the economy was showing stability, he warned: “We must be aware that given the complicated and severe economic conditions both at home and abroad, the slowing global economic growth, and increasing external instabilities and uncertainties, the economy is under mounting downward pressure.”

Services and high-tech manufacturing were the key areas of growth, while employment was “generally stable,” he said.

Beijing has stepped up support for the economy with major tax cuts and measures making it easier for banks to increase lending, including a reduction in the amount of cash they must keep in reserve.

And on Wednesday the central People’s Bank of China said it would pump 200 billion yuan ($28 billion) into the financial system through its medium-term lending facility to banks, to maintain liquidity.

But the efforts have not been enough to offset the blow from softening demand at home, which highlights the struggle leaders have in their drive to recalibrate the economy from one driven by exports and investment to one built on consumer spending.

The trade conflict and weak domestic demand prompted the International Monetary Fund to lower its 2019 growth forecast for China to 6.1 percent from 6.2 percent on Tuesday.

A “phase one” deal announced by US President Donald Trump last Friday after he met China’s top negotiator Liu He in Washington offered a temporary reprieve from further tariff hikes.

The deal, however, did not roll back any of the tariffs already imposed on hundreds of billions of dollars in trade between the economic powers, nor did it address another round of import taxes planned for December.


Investment and energy experts welcome ‘sensible’ Saudi Aramco IPO valuation

Updated 23 min 43 sec ago

Investment and energy experts welcome ‘sensible’ Saudi Aramco IPO valuation

  • Price regarded as a sensible compromise and that it will sell the IPO
  • Experts said the Aramco valuation was justified by the financial metrics

DUBAI: Investment professionals and energy experts delivered a mainly enthusiastic response to the pricing of shares in Saudi Aramco and the overall valuation of the biggest oil company in the world at between $1.6 trillion and $1.7 trillion.

Al Mal Capital, a Dubai-based investment bank, said that it was positive on the Aramco initial public offering (IPO) on that kind of valuation, which it said was justified by the financial metrics.

“We believe Aramco’s IPO is a central pillar of Saudi Arabia’s Vision 2030. In our view, the broader privatization of state assets will likely accelerate the flow of foreign capital into the Kingdom, improve liquidity and transparency as well as continue to help diversify its economy away from its dependency on oil. While many investors were skeptical about the ability of Saudi Arabia to roll out its ambitious agenda, they seem to be right on track.”

Tarek Fadhallah, chief executive officer of Nomura Asset Management in the Middle East, said via Twitter: “My first impression is that the price is a sensible compromise and that it will sell the IPO. Aramco should easily raise the $8.5bn from retail investors but the 29 global coordinators, managers and financial advisers will need to find the other $17 billion. A few billion from China would help.”

Robin Mills, chief executive of the Qamar Energy consultancy, said; “I think it’s a reasonable compromise. The price is well above most independent valuations but well below the aspirational price. It implies dividend yields a bit lower than the super-majors (the independent oil companies), but a similar price earnings ratio (the measure of the share price rated according to profits). Retail and local investors should be sufficient. We’ll have to see about the foreign investors.”

Ellen Wald, energy markets consultant and author of the book Saudi, Inc., said American investor would still be undecided on the IPO. 

“Remember, investors don’t put money in because they think the value is accurate. Smart investors put money in because they think the value will rise. It all depends on whether they see signs the price will rise during their time frame.”

American oil finance expert David Hodson, managing director of BluePearl Management, said: “This valuation seems to be more reasonable based on the fundamentals. Potential investors in Western markets will base their decision on cold hard facts like dividends and growth prospects. From what we now know, Aramco is offering them a compelling investment proposition to consider.”