China Moves to Maintain Stability
with as many as 19 provinces in China potentially falling behind their growth targets in Q3 2018, the effects of the trade war that might linger into 2019 have led to rapid activity from the Chinese Government to promote stability in the economy. The decline in key indicators has seen analysts projecting a deflation threat. November saw a slower-than-expected growth in the monthly exports and imports. China, however, has actively sought to relieve the stress on the economy, by shifting policy priorities from debt reduction to increased efforts to bolster economic growth.
Key Economic Indicators
The producer price index (PPI) rose by 2.7 percent in November year on year, compared to the 3.3 percent increase in October. The consumer price index (CPI) rose to 2.2 percent in November from a year earlier, a decrease from October’s 2.5 percent. On a month-onmonth basis, PPI fell 0.2 percent, after it saw a 0.4 percent gain in October. CPI fell 0.2 percent month-on-month. China’s foreign exchange reserves rose by $9 billion to reach $3.062 trillion in November. This is China’s first monthly gain in foreign reserves since July 2018.
Manufacturing Sector Stalls
China’s official manufacturing purchasing managers’ index (PMI) declined from 50.2 in October to 50 in November. Despite predictions that the index would remain unchanged from its October position, this index of 50 indicates that there was neither growth nor contraction for that month. The threat of tariffs being raised in January may have spurred the decline in new orders.
Temporary Truce at G20 China-u.s. Meeting
Chinese President Xi Jinping and U.S. President Donald Trump met during a dinner at the 2018 G20 Summit held in Argentina. At the dinner, held on day 150 of the trade war, a temporary truce was announced. President Trump had threatened to raise the existing 10 percent tariff to 25 percent on January 1, 2019; however the truce resulted in a 90-day agreement to not raise or impose new tariffs until March 1, 2019. The two sides are expected to continue to work toward creating a larger trade deal, should terms presented by both sides be met within the 90-day period.
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