Daily Management Review

No Major Hit To Chinese Economy By Trade War In Coming Days: Morgan Stanley


08/29/2018




No Major Hit To Chinese Economy By Trade War In Coming Days: Morgan Stanley
According to a leading Chinese economist, with the aim of cushioning some of the impacts that could hit its economy because of its trade war with the United States, the Chinese government would continue to implement adequate counter measures.
 
"We are not expecting any major growth correction because we think the potential impact from trade tariffs will be partially cushioned by the policy easing measures taken by the policy makers," Robin Xing, chief China economist at Morgan Stanley, told the media at the Morgan Stanley Technology, Media and Telecom Conference in Beijing.
 
It has been less than 7 days that tariffs on each other’s foods worth $16 billion have been implemented by both the US and China. Earlier in July, both the countries also imposed tit-for-tat tariffs on each other’s goods worth $34 billion each.
 
The markets and analysts now have their eyes keenly fixed on what happens next opt the threat of imposing a third round of tariffs on each other which would be worth $200 billion with the lead likely to be taken by the US later in the year. 
 
Xing said that the degree of connection that the supply chains of Chinese companies with East Asia would determine the impact of the proposed third round of US tariffs on $200 billion worth of Chinese exports into the country.
 
He said that about 0.7 per cent of China’s growth can be lost because of the disruption of the supply chain of Chinese companies due to the trade war.
 
Such a situation would force China to take up more meaningful measures that would ease the impact for Chinese companies such as cuts in taxes and boosting the credit supply and liquidity in the Chinese financial system.
 
According to the latest manufacturing data which shows slowing exports indicates that the Chinese economy and especially its manufacturing sector is already being affected by the U.S. tariffs. It is likely that in August, the manufacturing activity in China would get slower, Xing said. However, he said that new bonds would be used by the Chinese authorities to cushion that impact in September and October.  
 
According to Xing, this impact from US tariffs would also be softened by infrastructure spending by the fourth quarter.
 
Xing said that despite a number of concerns about debt in the Chinese economy, the easing measure that would be taken up by Chinese authorities this time would be "defensive" and not as "massive" as the recent stimulus packages which included the amount of injection of liquidity in 2008 during the global financial crisis. Xing expects that there would be no rate cuts by Beijing or any further loosening of property policies, Xing projected.
 
According to estimates of Morgan Stanley, there would be a slowdown in Chinese GDP growth to 6.4 per cent by the first half of next year compared to the official growth rate of 6.8 per cent that was announced for the first half of this year, Xing said.
 
(Source:www.cnbc.com)






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