China Is Too Strong to Lose the Trade War

China’s prudent monetary policies are workable because counter-cyclical adjustments make sense if used in moderation and implemented in a timely fashion, given that inflation is low and the money supply is taken into account. A sensible approach can lower borrowing costs for all sectors of the economy, yielding benefits for businesses that borrow money. However, this is all just my personal viewpoint, and shouldn't be mistaken for that of an expert proficient in financial and monetary policymaking.

China’s economy continues to advance at a stable rate

The negative impact of the ongoing trade war on China’s economy doesn’t appear to be as dire as the IMF and World Bank had predicted. From my understanding, China’s GDP growth has slowed by a trivial 0.1-0.2 percent. China is more than capable of meeting the target 2019 growth rate of 6.0-6.5% established by the government, which is only slightly lower than India’s projected 6.7% growth. China is currently the biggest engine driving world economic growth, accounting for 30%. It's due to China’s stable macro-economy that since the 2009 recession, the global economy hasn't contracted. However, fears that the world economy is headed towards a recession haven't been discounted, as US GDP growth is expected to total 2.2% in 2019, less than the 2.9% rate posted in 2018.

China’s macro-economic indicators provide the answer to anticipated goals

China’s main macro-economic indicators in the first half of 2019 basically match expectations. The consumer price index (CPI) rose just by 2.2% during the first six months of 2019, close to the government's target of roughly 3%. China’s economic policy reflects hopes to ensure a steady transition from high-speed progress to high-quality development. Moreover, China has outperformed its G20 peers in terms of its main macro-economic indicators. China continues to boast low inflation and investigated unemployment rates (5.1%), with a slightly lower growth rate than India's. While China’s financial deficit was 0.2 percentage points higher than in the previous year, this increase remains controllable.

China’s slowing economic growth is not attributable to the trade war

China’s economic growth has slid to 6.3% (annualised) in the past six months from 6.9% in 2015. The real reasons for this are as follows.

a.       China’s labour forces are featured with zero growth.

b.      Surging rates of fixed investments across society have continuously fallen.

c.       The contribution of scientific and technological advances to China’s economic growth has risen to 58.5% in 2018 from 55.1% in 2015.

d.      Slowing economic growth has had a positive effect on environmental conservation.

This last factor is reflected in a less elastic energy/GNP growth coefficient, which should help China reach a point where carbon emissions, having reached their peak, can be lowered in advance. This will facilitate the realization of major obligatory targets regarding energy conservation and environmental protection, as formulated in the 13th Five Year Plan.

What measures will China take to address the changing external climate and the trade war with the US?

a.       Market entities which accounting for over the 100 million registered should be activated, on a par with tax reduction and charges decreasing to a dramatic degree. The value has arrived to RMB 1.17 trillion varying from January—June. That in 2019 must surpass RMB 2 trillion.

b.      The vast domestic market should be fully tapped. The total volume of retail sales of consumer goods has soared by 8.4% year-on-year during the first two quarters, higher than in any other country. Online retail sales of physical goods nationwide posted 21.6% growth, contributing to 19.6% of the volume. Final consumption expenditures have accounted for over 60% of economic progress.

c.       China’s 5G market should be launched ahead of time. Total related investment over the course of the next five years should range between RMB 900 billion and RMB 1.5 trillion (approximately US $130.8 billion to $218.0 billion), allowing China to emerge as the world's biggest 5G market.

d.      Every sector of the economy should be opened further to the outside world. China's 2019 'Negative List' of industries which are off-limits to Foreign Direct Investment (FDI) already reflects the opening of the economy. FDI has grown by 6.8%, and ranks 2nd worldwide.

e.       Tariffs should be cut to a dependent rate, and non-tariff trade barriers should be painstakingly eradicated. The import of goods and services should be proactively added. Trade activity (import/export) between China and its Belt and Road Initiative partners has grown by 9.7% during the first half of 2019.

f.       Currency exchange rates should be maintained in a reasonable and balanced range. China has never triggered a currency depreciation war.

g.      China enjoys a comprehensive degree of strength in addressing the trade war stirred by the US in terms of its economy, trade, science, technology and international influence. 




Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.