Thursday, 15 November, 2018

China's economy stumbles as trade war pressure grows

People walk past an electronic board showing Japan's Nikkei average and Japanese yen's exchange rate against the U.S. dollar outside a brokerage in Tokyo Japan China's 3Q GDP growth slowest since 2009
Jodi Jackson | 22 October, 2018, 07:32

Traders worry whether the market is accurately pricing in the impact of Trump's trade war with China, and wonder how much longer a nine-and-a-half-year-old bull-market rally can last.

Prices in China's largest cities where the strictest control measures are in place, were mostly stable in September, though Guangzhou prices rose 0.4 per cent on-month and 4.3 per cent year-on-year. "Economic fundamentals are good", the central bank governor, Yi Gang, said. Beijing responded with its own tariff hikes on $110 billion of American imports but is running out of goods for retaliation due to their lopsided trade balance.

A number of investment banks, the International Monetary Fund and the Economist Intelligence Unit have all lowered their China growth forecasts to 6.2% in 2019, on the back of the trade war.

"There is more uncertainty from China-U.S. trade tensions, so economic performance is facing downwards pressure", said Mao Shengyong, spokesman for the National Bureau of Statistics. The Shanghai Composite Index-the worst performer among global benchmarks-has declined 25% so far this year. China's vice premier Liu He, who oversees the economy and financial sector, also chimed in to bolster sentiment.

"While this may be a cure for wounded investors, the market will likely remain stuck in a downward spiral if implementation of strong policies doesn't follow", said Shen Zhengyang, a Shanghai-based strategist at Northeast Securities Co.

Beijing has rejected US pressure to scale back industrial development plans Washington says are based on stealing or pressuring foreign companies to hand over technology. Growth in industrial output and consumption weakened in the quarter, while exports held up despite the country's bruising trade fight with the U.S. At the time, Washington urged Japan to reduce its reliance on exports and shift the economy to one that runs on domestic demand.

Beijing tightened controls on lending previous year to rein in a debt boom. The country is saddled with extraordinary levels of debt so policymakers are reluctant to take measures to stimulate the economy the way they did after 2008, the report quoted observers as saying. There's no end in sight for this trade spat, and that's what's making so many Chinese nervous about the outlook of the economy.and therefore reluctant to spend. China's Minister for Commerce, Zhong Shan, in his recent statement said, 'There is a view in the USA that so long as the United States keeps increasing tariffs, China will back down. The numbers showed the effects of Beijing's mounting debt as well as trade disputes with the United States.

In Hong Kong, the Hang Seng index had a volatile morning, but was down 0.34% at midday, while the Hong Kong China Enterprises Index was off 0.1%. But makers of less price-sensitive exports such as factory equipment and medical technology are confident they can keep their market share. This move hits soybean farmers in the US, who form part of Donald Trump's support base.

The US is also withdrawing from the Universal Postal Union, a 144-year old treaty that helps set global postal rates, over concerns that the treaty unfairly advantages Chinese exporters.

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