The slowdown in the Chinese economy deepened in August. It has registered its slowest growth rate of 17 and a half years as trade spats with the US continue and local demand weakens.

Retail sales and investment indicators are also worsening, supporting claims that China will likely cut its base rates for the first time in more than three years this week to prevent a more significant drop in activity. Despite measures taken to stimulate the economic growth, there are still sectors in the world’s second-largest economy that need to be stabilized, and analysts believe Beijing is obliged to use additional incentives to prevent a sharp slowdown.

The industrial production growth unexpectedly slowed to 4.4% in August compared to the same period in 2018, registering the slowest pace since February 2002. This indicator declines compared to July when a 4.8% growth was reported. Analysts forecast an increase of up to 5.2%.

In August, the trade war escalated again after US President Donald Trump announced new tariffs on Chinese goods since September 1, and Beijing left the yuan sharply depreciated for several days.

After responding with new tariffs, Donald Trump said that existing customs duties would also be increased in October and December.

While both sides are ready to resume negotiations in early October, most analysts do not expect a long-term trade deal or even significant progress.

Chinese Prime Minister Li Keqiang said in an interview published before the release of economic data on Monday that it was “very difficult” for the economy to grow by 6% or more.

In recent weeks, several analysts said that China’s economic growth is already approaching the lower of Beijing’s annual growth target of about 6-6.5%, which is likely to lead to more serious policy easing. The second quarter’s economic growth slowed to 6.2%, registering its slowest pace in nearly 30 years.

Retail sales fell short of expectations – growth slowed to 7.5% from 7.6% in July. Analysts forecast a slight recovery of up to 7.9%.

The car sales reported a decline throughout the year, forcing the Chinese Bureau of Statistics to begin a new survey of consumption. Excluding cars, retail sales are up 9.3% year on year.

Data on investments in fixed assets have also been disappointing. This indicator increased by 5.5% for the first eight months of the year, compared to the same period of 2018, which is 5.7% less than in January-July. Analysts expected growth of 5.6%.

Investment in infrastructure, a major driver of growth, also rose to 4.2% in the first eight months of this year, from 3.8% in January-July.