BEIJING--China is expected to report on Monday that economic growth slowed to its weakest pace in at least 27 years in the second quarter, reinforcing the case for more stimulus as a bruising trade war with the United States drags on.
Policymakers are likely to ratchet up support measures to prevent mass job losses that could pose a threat to social stability, but analysts say the room for aggressive stimulus is limited by fears of adding to already high debt levels and structural risks.
"The gloom hanging over China's economy is unlikely to go away soon due to challenges on both domestic and external fronts," analysts at ANZ said in a note.
Analysts polled by Reuters expect China to report gross domestic product (GDP) grew 6.2% in the April-June quarter from a year earlier, the slowest pace since the first quarter of 1992, the earliest quarterly data on record. That would mark a further loss of momentum from the previous quarter's 6.4%, which could bring the full-year economic growth to a near 30-year low of 6.2%.
The government has been leaning more on fiscal stimulus to underpin growth this year, announcing massive tax cuts worth nearly 2 trillion yuan ($291 billion) and a quota of 2.15 trillion yuan for special bond issuance by local governments aim at boosting infrastructure construction. But the economy has been slow to respond, and business confidence remains shaky, weighing on investment. Investors fear a longer and costlier trade war between the world's two largest economies could trigger a global recession.
The government will publish the second-quarter GDP data on Monday, along with activity data for June which could point to continued weakness. Data on Friday showed exports fell in June after the U.S. sharply hiked tariffs on Chinese goods, while imports shrank more than expected, highlighting sluggish domestic demand. Bank lending and credit data were largely solid, however. A recent official factory gauge for June showed Chinese manufacturers were shedding jobs at the fastest pace since the global financial crisis a decade ago.
