Trade war impact on Chinese economy to dwindle in 2020

Impact on the Chinese economy from the protracted ChinaUS trade war will dwindle in 2020 as the country adapts to external pressure, a change that will help China maintain a relatively robust growth in 2020 despite an anticipated growth-rate slowdown, analysts said on Friday.

“The trade war’s impact on China’s economy will be evident at first and then gradually ease if the situation does not deteriorate further, as China steadily adapts to such external pressure and builds its antibodies,” said Li Xiujun, a macroeconomics analyst at credit rating agency Moody’s.

Experts are making their comments at a time when both China and the US are moving to settle the prolonged trade dispute, with no clear indication of final results though the market has recently seen some encouraging signs.

Liu Xuezhi, a senior economist at the Bank of Communications, said that chances are low that China-US trade relations will worsen next year, given the recent encouraging signs.

These signs, together with the fact that the Trump administration now has “less room” to launch further tariff sanctions against China, mean that China will feel fewer burdens from the trade war in 2020, he said.

As there will be less impact from the trade war and more positive factors including active fiscal policies, China will manage to achieve a relevantly robust growth in 2020, although the slowdown will continue into the next year, according to experts.

Moody’s anticipated that China’s 2020 GDP growth will slow to 5.8 percent, compared to its 6.2 percent growth forecast for this year.

The slowdown this year, from last year’s 6.6 percent growth, is mostly due to domestic structural adjustments such as deleveraging, Li told the Global Times.

“We think China’s growth this year is acceptable and meets our expectations. We don’t see anything that has happened which would exacerbate China’s credit status. In general, the Chinese government is good at withstanding downward economic pressure given the current trade conditions,” said Li.

The economic stabilization shows the resilience of China’s economy while the global economy remains firmly stuck in low gear. It also demonstrates the Chinese government’s capability of moving its economy toward stabilization in the face of domestic and external pressure, experts said.

“The fact that China, with such a large economic scale, can achieve a moderate to high annual growth rate is testament to its economic resilience,” Liu said.