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TRADE WARS
China economic growth slows in second quarter, warns on trade war
By Lillian DING, Ryan MCMORROW
Beijing (AFP) July 16, 2018

As trade war rages, Trump flags fly out of China factory
Fuyang, China (AFP) July 16, 2018 - As the China-US trade war rages, a factory set amid corn and mulberry fields in central China stitches together US and "Trump 2020" flags -- and business is good.

The US and China have slapped tariffs on billions of dollars worth of each other's goods, but there is little evidence of the dispute at the Jiahao Flag Company in Anhui province.

Instead, as a dozen sample flags flutter outside the factory building, workers bustle and sewing machines buzz inside amid a profusion of colour from the factory's wares.

They include a current hot-seller -- blue and white banners declaring US President Donald Trump's re-election intentions that read: "Trump 2020: Keep America Great."

Trump has long railed against Chinese imports, pushed a "buy American" ethos, and launched the trade confrontation this year to punish China for what he considers predatory trade policies.

- Growing demand -

But the anger does not appear to extend to flags.

"We can easily sell more than 10,000 Trump 2020 campaign flags each month," said Yao Dan, who founded the family business in 2014, though the company does not track who the ultimate buyers are.

The company makes thousands of flags daily for "just about every country, mainly for export" including to the US, said his older sister Yao Yuanyuan, 33, who manages the factory.

In the lead-up to the 2016 US election that brought Trump to power, she said, the factory focused for three months solely on making Trump campaign flags to satisfy demand.

The current trade conflict has had no discernible impact, she adds. American-themed flags remain among their top-sellers, with many sold via Chinese e-commerce giant Alibaba, and sales volumes are expanding.

"The demand has been growing," Yao Yuanyuan said.

"This market is not yet saturated. We are hoping to increase production and expand the factory's size, at least to double it within the next three years."

Trump is widely accused of taking a simplistic view of the complex US-China trade and economic relationship as well as the fact that Trump family businesses continue to have products manufactured in China.

The flag company's success has been a boon for local workers, mostly former stay-at-home moms or women who might otherwise have had to seek work in other provinces, who now work flexible hours to earn about 3,000 yuan ($450) a month.

"It's closer to home and they pay me pretty well," Qi Chunyan, 40, said while sewing a white stripe onto an American flag.

"It's convenient for me to take care of the kids and the elderly in the family."

Some bring their children during the summer when school is out.

"If no one is at home to take care of my daughter, I bring her here to play and see whether adult work is hard," said Wang Bingqin, 45, as her 10-year-old daughter helped trim the flags that her mother had sewed.

"It will be helpful for her when she grows up."

China said on Monday its economic growth slowed slightly in the second quarter as a trade war with the United States gained pace, while it warned of the global damage that could be caused if the row persists.

The world's second-biggest economy expanded 6.7 percent in April-June, down from 6.8 percent in the first quarter and in line with a forecasts in an AFP survey of economists.

The data was released just as European Council President Donald Tusk said at an EU summit with China in Beijing that trade tensions could spiral into a "hot conflict", calling on the US, China and Russia to find a resolution.

Despite the quarterly deceleration, growth was still higher than the annual target of around 6.5 percent set by the government, but China nevertheless faces an "extremely complex environment both at home and abroad", said Mao Shengyong, a spokesman for the national statistics bureau.

Beijing faces a multi-front battle to defend its economy, fighting to cut its debt mountain while the yuan currency and Chinese stock markets tumble.

"World trade protectionism continues to heat up, posing a major challenge to the world economic recovery and adding challenges and uncertainties for us," Mao said.

"From our domestic perspective, economic development has still been unbalanced and unstable, and is still in the process of structural adjustment and transformation."

The impact of the deepening trade conflict with the United States was yet to fully kick in, Mao said, noting that Beijing would continue to assess the situation in the second half of the year.

- Slowing down -

But he added that the fight "will have an impact on the economies of both China and the United States, and now that the world economy is deeply integrated, and the industrial chain is globalised, many related countries will also be affected", Mao said.

The dispute with Beijing comes on top of Washington's confrontations with other major trading partners including Canada, Mexico and the European Union, which have also retaliated against the US.

Washington and Beijing imposed tit-for-tat tariffs on $34 billion of goods this month and the US raised the stakes last week by threatening to impose measures on another $200 billion worth of goods, prompting China to vow retaliation.

Over the past decade, about 20 percent of China's exports have gone to US markets, according to Moody's Investors Services, with exports still accounting for a sizeable chunk of the giant economy.

Trump's latest threat would mean Washington will have imposed tariffs on around half of China's total exports to the United States.

"China's economy appears to be on a slowing path. The government seems to be easing policy gently... despite its goal of minimising financial risks," said Alaistair Chan of Moody's.

"Trade disputes with the US have hurt market sentiment, and investment is also cooling."

Beijing's battle against debt has curtailed spending -- with growth in fixed asset investment slumping to 6.0 percent in the first half of the year, the slowest pace on record.

Manufacturing activity also slowed in June, as did output at factories and workshops.

Although trade data last week showed China's export machine holding up, analysts warned the numbers may have been inflated by exporters pushing out shipments early to beat the scheduled tariffs.

Retail sales, a key gauge of Beijing's campaign to rebalance its economy toward domestic consumption, provided a bright spot, growing 9.0 percent in June.

The yuan's slide is hurting Chinese consumers while helping exporters who face the higher US tariffs.

- Stimulus measures -

"The upshot is that the statistics bureau is now starting to more publicly acknowledge that the economy is losing steam," said Julian Evans-Pritchard, China economist at Capital Economics, wrote in a research note.

"This should make it easier for officials to justify shifting to a more supportive policy stance."

The statistics bureau said economic progress must be balanced with "maintaining stability", indicating supportive policy measures could be rolled out as needed.

Noting the fall in infrastructure investment, Mao said "compliant projects may come to fruition at a faster pace" in the second half of the year.

China's central bank has taken steps to free up funding for small firms, and some analysts forecast an interest rate cut to stimulate the economy.


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TRADE WARS
China's factory-gate prices rise in June
Beijing (AFP) July 10, 2018
China's factory price inflation rose in June, the government said Tuesday, as a trade war threatens producers in both of the world's top two economies. The producer price index (PPI) rose 4.7 percent year-on-year, according to the National Bureau of Statistics (NBS), a notch above the 4.5-percent gain forecast in a Bloomberg News survey. The consumer price index (CPI), a key measure of retail inflation, rose 1.9 percent last month on-year, up from 1.8 percent in May and in line with Bloomberg's ... read more

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