BEIJING • Chinese growth slowed slightly in the second quarter as the world's No. 2 economy faced a snowballing trade fight with the United States.

The economy expanded by 6.7 per cent in the April-June period, down from 6.8 per cent in the first quarter, and in line with a 6.7 per cent rate tipped in an Agence France-Presse survey of economists.

Despite the quarterly deceleration, growth was still higher than the annual target of around 6.5 per cent set by the government.

China faced an "extremely complex environment both at home and abroad", said Mr Mao Shengyong, a spokesman for the national statistics bureau, noting growth remained strong.

China is facing a multi-front battle to defend its economy, fighting to cut its debt mountain while the yuan and local stock markets tumble in the face of the trade conflict.

"We should also be aware that external uncertainties are increasing and economic restructuring is in a phase of overcoming difficulties," Mr Mao said.

The impact of the deepening trade conflict with the US has yet to fully kick in, according to analysts, who added, however, that Beijing's battle to rein in pollution and spiralling debt levels had crimped growth.

Both Washington and Beijing slapped new tariffs on US$34 billion (S$46 billion) of each other's goods earlier this month. Washington raised the stakes last week by threatening to impose fresh tariffs on another US$200 billion of Chinese goods, with Beijing vowing it would retaliate once again.

Signs of a further slowdown are mounting.

Investment in fixed assets continued to fall in the first half of the year, slowing to 6 per cent, down 1.5 percentage points from the first quarter and marking the slowest pace since data collection began in 1999.

Factory activity also slowed last month, dropping from an eight-month high.

Trade data last week provided a bright spot, showing China's export machine held up in the face of the mounting tensions - but analysts warned that the numbers may have been inflated by exporters pushing out shipments early to beat the scheduled tariffs.

The yuan, meanwhile, has been sliding, though a weaker currency might help exporters facing the US tariffs.

Beijing has indicated it would ease up on its tough fight against debt, which analysts have blamed for the growth slowdown.

China should continue making progress on that front while "maintaining stability", Mr Mao said.

Last month, China's central bank said it would reduce the reserve requirement ratio for most banks in an effort to free up funding for small firms.

AGENCE FRANCE-PRESSE