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CHINA-ECONOMY-GROWTH-FORECAST,ADVANCER
China economic growth eased slightly in Q2: AFP poll
SHANGHAI, July 13, 2018 (BSS/AFP) – Chinese growth slowed only slightly in
the second quarter as the impact of the deepening trade conflict with the
United States was yet to kick in, according to analysts surveyed by AFP.
China is expected to announce that the world’s second-largest economy
expanded 6.7 percent in April-June when it releases gross domestic product
figures on Monday, a survey of 13 economists found.
That would be down 0.1 percentage point from the previous three quarters.
Economists said the months-long threat of tit-for-tat tariffs on tens of
billions of dollars of trade goods between the world’s two biggest economies
— which officially came into force last week — would not have a significant
impact until next year, if the row continues.
The Trump administration implemented duties on $34 billion in goods on July
6, with China immediately taking dollar-for-dollar counter-measures.
Washington raised the stakes this week by threatening to impose fresh
tariffs on another $200 billion in Chinese goods, with Beijing vowing it
would retaliate once again.
Exports are still a significant chunk of China’s economy and the total
tariffs implemented or announced by Washington target a vast range of goods,
including cars, machinery, electronics and consumer appliances.
If Trump follows through with his latest threats, the US would have imposed
tariffs on around half of China’s total exports to the country.
Capital Economics said the cumulative impact of the measures now on the
table could potentially reduce China’s overall economy by 0.5 percentage
points, but that the impact could deepen if the battle escalates.
With a smaller share of US imports to retaliate against, Beijing is seen
ultimately as having a weaker hand.
– Brace for impact –
If a full-blown trade war develops, China may have to retaliate in
services, investment, and by potentially erecting new hurdles for US
corporations operating in China, said Liao Qun, chief economist with Citic
Bank International.
“The real impact will start to show next year. And if it is a full-blown
trade war, in the worst case scenario, China’s GDP growth could fall below
five percent,” Liao said.
Tianjie He of Oxford Economics said the economic growth rate could shrink
by 0.2 percentage points if the US were to go ahead with the additional $200
billion in tariffs and China retaliates.
“In addition to the impact on GDP growth, the added uncertainty is already
dampening business confidence and delaying investment globally. Overall, the
trade war will weigh on growth, confidence, financial markets and supply
chains,” He said.
The key Shanghai Composite Index has already fallen 14 percent this year
amid the turbulence.
Liao added that over the short term China — which has waged a campaign to
discourage excessive credit amid fears of ballooning debt — is likely to
shift gears slightly and loosen monetary policy to keep the economic growth
rate up and may offer subsidise to exporters.
Over the longer-term, the China-US trade war could spur Beijing to super-
charge its current push to encourage domestic demand as a proportion of the
economy, a strategy taken in part to lessen exposure to the rise and fall of
global export demand.
“The best case is that the US backs off. If the US shows an intention to
back off, China would definitely compromise,” Liao said.
“But it is really hard for people to predict what the US will do.”
BSS/AFP/HR/1320