When China releases its third-quarter GDP report on Friday morning, the results could have a huge impact on global equity markets. This report will reflect the impact of the ongoing trade war between the U.S. and China and it could set the tone for the negotiations between the two countries going forward.

Analysts expect the report to show that growth slowed to an annual rate of 6.6%. While most countries would love to have such a growth rate, that would be the lowest growth rate in China since the end of the global financial crisis in 2009.

China’s GDP growth rate has been trending lower for eight years now after peaking at over 12% in 2010. The growth rate has been under 7% since 2015, but has been constant in the 6.7% to 6.9% for the last three years.

With the trade war increasing in severity during the third quarter, there is some fear that the GDP rate could drop even lower than the 6.6%. Of course, it was at the end of the third quarter that China and the U.S. each imposed a new round of tariffs on each other’s exports. There is also a deadline of sorts for another round of tariffs to be implemented at the end of the fourth quarter.

One interesting point that could be a preview of the report came from the September export numbers out of China. It seems that manufacturers stepped up their shipments to the U.S. ahead of the new tariffs. Exports jumped by 14.5% in September compared to the previous year. The dollar amount of exports hit a record high and so did the trade surplus with the U.S. Obviously such a boost isn’t sustainable and it could reflect negatively on the fourth quarter GDP numbers.

The trade rhetoric heated up in January and since that time, most Chinese stocks have been trending lower. The Shanghai Composite Index is down 28.6% from the January high and it reached its lowest level since 2014 this week.

Looking at the monthly chart you can see how the index is down over 50% from the all-time high in 2015. You should also notice that the overbought/oversold indicators are in oversold territory. When these indicators have reached oversold levels in the past, we have seen rallies in most cases.

When the indicators were in oversold territory in early 2016, the index rose for almost two years. When they were at similar levels in late 2012, we saw a quick rally that lasted a few months and there was a similar response in late 2011.

Obviously, this dip is different because it is being caused by the trade war with the U.S. If the GDP report on Friday comes in below expectations, it could force Beijing to change negotiation tactics with the U.S. and could actually increase the chances of an agreement being reached.

I still maintain that President Trump would like to announce that progress is being made prior to the midterm elections on November 6, but time is running out for that to happen. We are only two and a half weeks away from that event.

One thing that does seem to be happening as a result of the trade war is that China’s economy seems to be shifting a little. In 2017, disposable income in China outpaced personal consumption. For the first part of 2018, consumption growth has outpaced disposable income growth. This could be a reflection of China shifting from an economy reliant on external demand to one that is more balanced—external demand and domestic consumption fueling growth.

GDP reports from most countries have an impact on equity trading, but this particular report seems to be even more important than usual.