Expert deems trade war deterioration as biggest risk for China’s economy

By Ma Jingjing Source:Global Times Published: 2020/1/1 20:43:40

Chinese and US trade officials make attempt at striking a trade deal to defuse an increasingly bruising trade war that has rattled global markets and presented mounting challenges to both economies. Photo: VCG

Any deterioration of the China-US trade war is deemed to be the biggest risk to China's economy in 2020, and China should adopt proactive fiscal policies and prudent monetary policies to offset the headwinds, an expert said on Monday.

"The biggest uncertainty comes from the ongoing China-US trade war, which may lead to China's economic growth rate sliding to around 6 percent or even slightly lower," Li Chang'an, a professor at the Department of Public Economics at the University of International Business and Economics, told the Global Times on Monday.

Although the two sides have agreed on the text of a phase-one trade deal, trade talks for a second-phase trade deal will be bumpier in a US presidential election year, given the complexity of issues like intellectual property rights, industrial policies and the fact that the US frequently goes back on its word, Li said.

The annual Central Economic Work Conference held in Beijing in December reaffirmed the complexity of the external risks China faces.

The global economy continues to slow down, the world is still undergoing in-depth adjustments due to the global financial crisis, profound changes are accelerating, and sources of turbulence have substantially increased, read a conference statement.

China's GDP totaled nearly 70 trillion yuan ($10 trillion) in the first three quarters, up 6.2 percent year-on-year, official data showed.

Standard Chartered predicts tariffs imposed by the US will reduce China's 2020 growth by 0.3 percentage points if a phase-one trade deal is reached, and by 0.6 percentage points if talks break down, according to a note sent to the Global Times.

To maintain domestic economic growth within a reasonable range, the key annual economic conference pointed to a series of measures including improving the structure and quality of employment, implementing a proactive fiscal policy and prudent monetary policy, and deepening the reform of the economic system.

Li forecasted that China will continue to conduct target-adjustment for the reserve requirement ratio in 2020, and noted that lowering the interest rate would also be possible amid the global tide of interest rate cuts.

Various opening-up measures will be implemented, and taxes and fees will be cut further to optimize the country's business environment and cooperate with other economies, he said.

The Standard Chartered note predicted that China's infrastructure investment will edge higher following fresh fiscal stimulus, and that car sales will be less of a drag on the country's economic growth in 2020.

Posted in: ECONOMY

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