Trump’s one factor China can’t control

WHO posted an impressive 6.8 per cent growth number for the fourth quarter of 2016 last week? That country was China. But there are a couple of risks I want to flag up.

The first, more in China’s control, is the housing market. One of the reasons we didn’t panic when China was having a wobble 12 months ago was that the authorities had already put in place measures to support the economy, not least the property market, and very successful they turned out to be. New home sales jumped about a quarter in 2016, and house prices on average across the country rose close to 20 per cent.

The trouble is that this rate of growth is too hot, and the government knows it, so has already set out to cool things in the bubbliest cities, such as Shanghai and Beijing. This is inevitably going to lead to a slowdown in both price appreciation and new home sales, but because it’s not showing up in the numbers yet nobody is much bothered. However, once the minus signs start appearing, probably in the spring, concerns about a “hard landing” will surface again.

Rather more out of China’s control are the actions of President Trump.

His has promised to declare China a currency manipulator. Well, yes, it is – it is spending countless billions of its reserves supporting the yuan. But China has been a paragon of virtue most of the time so it is going to be hard for Trump to make this charge stick.

Then there is the question of trade barriers and tariffs.

We have been here before. Under pressure from the unions, President Obama in 2009 raised an additional 35 per cent tariff on car tyres from China leading to higher prices for all. China retaliated by putting a 135 per cent tax on imports of chicken feet from the US, ultimately depriving the poultry industry of $1 billion of much needed revenue.

America ended up worse off than China. Let’s see what happens when Trump faces reality. John Wyn-Evans is head of investment strategy at Investec Wealth & Investment