With President Trump apparently putting finishing touches to another $200 billion sanctions, many observers have given different opinions about how the Chinese economy will suffer.
International Monetary FundThe international organization that deals with monetary issues in countries around the world has predicted that the current trade war will cause China’s GDP growth to be cut by 1.6-2%. The current expected GDP growth for the country stands at 6.6%. The IMF detailed these observations in a report published recently. They noted that while the actual impact of the sanctions is quite small, the real influence is from investor confidence in the financial markets. The expected growth rate for China next year has already been lowered to 6.2%. Furthermore, the IMF believes that the approximately 1.6% hit that the country’s economy is expected to take over the next two years will be offset by their policies to stimulate the economy.
Morgan StanleyOne of the biggest investment banks in the world has stated that there will be no “major hit” to the Chinese economy as a result of the ongoing trade war. However, a leading China economist at the bank has predicted the growth rate to fall by 0.7%. This was followed by the assertion that the government continues to implement measures that will dilute the impact of this decline. The observers at Morgan Stanley have stated that the U.S. tariffs are already affecting manufacturing of goods in China, but the second largest economy in the world continues to introduce measures like increased infrastructure spending to negate these impacts.
CLSA Ltd.The Hong Kong based mortgage and investment company has also stated that the fears about the trade war between China and the U.S. are being overdone. The CEO of the company recently stated that it takes a long time to move trade flows and tariffs cannot significantly impact Chinese industries immediately. This is contrary to what many investors believe about the fate of the Chinese economy. He asserted that investors are also beginning to understand that things are much more complex than what it is being shown on the ground.
ConclusionThe observations from different elements watching the market can vary, but both countries are still locked in a strong retaliatory trade war imposing sanctions against one another quite frequently. In July, both countries slapped levies of $34 billion on goods being imported from either country and only recently a further $16 billion were introduced in terms of tariffs. With a new bomb being prepared in Washington, there seems to be no truce in sight. Both the countries, as well as those associated with them, continue to bear the burden on their economies.
Dr. Victor Chukwuemeka
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