The Chinese economy grew at its slowest pace since 2016 in the second quarter, as the country grapples with monetary policy decisions amidst mounting tension with the US.

China’s economy grew at an expected 6.7 percent in the second quarter, with key readings on investment growth and industrial output also slowing in June. Retail sales remained roughly the same as the previous period. The official reading remained in line with analysts’ expectations.

The country has been dealing with high levels of debt and the appropriate monetary policy approach to tackle them. On one hand tighter policy will force financial deleveraging, but a softer approach would be better to support growth.

The ongoing trade spat between the US and China is also likely to have a negative impact on the economy, something which may well reverberate globally.