China's economy slows sharply, in challenge for Xi

[DONGGUAN] China's consumers and businesses are losing confidence. Car sales have plunged. The housing market is stumbling. Some factories are letting workers off for the big Lunar New Year holiday two months early.

China's economy has slowed sharply in recent months, presenting perhaps the biggest challenge to its top leader, Xi Jinping, in his six years of rule. At home, he faces difficult choices that could rekindle growth but add to the country's long-term problems, like its heavy debt. On the world stage, he has been forced to make concessions to the United States as President Donald Trump's trade war intensifies.

On Friday, Chinese officials reported surprisingly weak growth in monthly retail sales and industrial production, weighing on global stock markets. Many economists say the slowdown is the worst since the global financial crisis a decade ago, when Beijing was forced to plow trillions of dollars into its economy to keep growth from derailing.

While the trade war with the United States provides a handy scapegoat, public blame for a prolonged downturn could ultimately fall on Mr Xi. Already the government has ordered that bad economic news be censored.

Mr Xi now faces more of a diplomatic balancing act. Chinese authorities have detained two Canadian nationals, in apparent retaliation for Canada's arrest of a top Chinese telecommunications executive at the behest of Washington. But Chinese officials have struck a quieter tone with the Trump administration over the arrest and separate allegations of hacking, since a sharp escalation in the trade war could seriously damage the economy.

Mr Trump already senses an advantage.

"China just announced that their economy is growing much slower than anticipated because of our Trade War with them," he tweeted on Friday. (The slowdown began before the imposition of the tariffs, but they have hurt both business and consumer confidence and will probably pinch even more if they linger or intensify.)

Regulators have ordered banks to lend more to private businesses. Ministers have promised to compensate businesses for not laying off workers. Environmental controls are being less stringently enforced, making it easier for polluting factories to stay open.

NYTIMES