Beijing mulls domestic issues, spurns Trump’s trade war: Report
China is focused on its domestic affairs like fortifying its power structure and stabilizing its economy, according to Jonathan Fenby, research chairman for TS Lombard. The London-based consultancy anticipates that China’s full-year growth of 6.5 percent will be spurred by a 6.3% growth during June-December. The firm echoes that although the Washington-Beijing trade war loomed large in the headlines recently, it is not top of mind for Chinese President Xi Jinping.Fenby said, “Pursuing the ‘Made in China 2025’,” economic and modernization policy “and pursuing the global ambitions set out by the Communist Party take precedence over the current trade war with the US,” as reported by CNBC.com.
Earlier this year, President Trump tweeted, “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” he wrote. He continued, “[For] example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore — we win big. It’s easy!”
But are trade wars really easy? Most experts and economists think not. They say many countries will lose if the two giant economies clash. China’s economy is the second largest in the world. Beijing posted a 2nd quarter growth rate of 6.7% in the month of July.
Notwithstanding, President Xi’s nonchalance, the so-called trade war has deeply affected international markets and made waves in the business communityrecently. Since the bilateral trade discussions between Beijing and Washington fell through, tensions have heated up, with US President Trump requesting a 25% increase in tariffs on $200 billion worth of Chinese-made goods. In the wake of all this, the weakening yuan has deflated by 6.5 percentage points when compared to the US dollar six weeks ago.
On Friday, China said that it would impose duties ranging from 5% to 25% on $60 billion of US imports if Trump carried through on his threat to pile additional tariffs on Chinese products.
President Trump faces many political and potential legal upheavals at home. President Xi does not. For this reason, analysts opine that China is less likely to blink first. Fenby added that he believesChina will hold out because Xi has invested his faith in the power of the Communist Partyto combat the conflict. “That made it even more essential,” said Fenby, for China “to avoid any weakening of their ruling mechanism by bowing to the US,” he concluded.
Minor impact on China’s Growth
The TS Lombard consultancy offered that “The impact of Trump's trade war on [China’s] growth will be manageable,” and that China “was already headed towards slower growth, but proactive fiscal and monetary policies should keep aggregate demand well supported,” according to CNBC.com.
Despite that optimism, the gold standard Shanghai Composite dipped more than 17% at the close of Friday’s market. Analysts say this showsthat equity markets will remain under pressure in the near term if trade offensives escalate.