There are telltale signs that China’s trade war with the US has begun to bite the Chinese. Much as the Chinese may feign bravado, there is a clear slowdown in the country’s hitherto-strong economy. Indeed, the Chinese economy grew 6.5 per cent in the third quarter from a year earlier, slower than the second quarter, official Chinese data has revealed. The GDP reading was the weakest year-on-year quarterly growth since the first quarter of 2009 at the height of the global financial crisis.

On a quarterly basis, growth slowed down to 1.6 per cent from a revised 1.7 per cent in the second quarter. Recent economic data have pointed to weakening domestic demand with softness across factory activity to infrastructure investment and consumer spending, as a multi-year crackdown on riskier lending and debt has pushed up companies’ borrowing costs. Economists expect China’s full-year growth to come in at 6.6 per cent this year — comfortably meeting the government’s 6.5 per cent target but there is a lurking discomfort.

China and the US have slapped tariffs on each other in recent months and plans for bilateral trade talks to resolve the dispute have stalled. The result of all this has been a domestic equities rout which has put pressure on China’s already softening economy and weakening currency. Significantly, China’s factory output growth has weakened to 5.8 per cent in September from a year earlier, while fixed-asset investment expanded at a slightly faster-than-expected 5.4 per cent in the first nine months of the year.

The factory output reading was the weakest since February 2016. Retail sales rose 9.2 per cent in September from a year earlier. Faced with a cooling economy, stock market hiccups and the yuan under pressure, policymakers are shifting their priorities to reducing risks to growth by gradually easing monetary and fiscal policy.