China

China: Trade dispute starts to squeeze the economy

For a long time it looked as though the trans-Pacific trade dispute would not really affect the Chinese economy. We now know that economic growth in the final quarter of last year amounted to 6.4%, the lowest level since the low point reached in the financial crisis ten years ago, falling short of the growth target that the Chinese government had set itself. This at least is what the official data from the country’s statistics bureau say. Doubts remain as to whether the decline may of late actually have been greater, but Beijing would probably not have permitted publication of an even weaker growth rate. Precisely in economically weaker phases such as the current one, missing targets and sharper volatility in economic growth in China are delicate issues, as the government likes to use the growth figures to demonstrate stability. For 2018 as a whole, economic growth came to 6.6%…

Weaker global economy – forecasts downgraded

Virtually no risk factor from the old year has lost any of its gravity with the start of the new year. Compounding this is the escalation in the domestic political situation in the USA in the form of the shutdown which has resulted in the week-long closure of some federal authorities. Provisional data publications also show that industry in the euro zone continued burdening the economy in the fourth quarter. We have therefore revised down our growth forecast for Germany, France and the euro zone as a whole for this year. For the US economy, the outlook for the year 2020 has also deteriorated. Throughout Europe, problems in the automotive industry have left their mark on the industrial sector. With the pace slowing down once again in the final quarter of 2018, we have lowered our growth forecast for the euro zone for this year to 1.2 percent. For quite…

China’s industry slows at the end of the year

China’s economy has proven to be less immune to the smouldering trade dispute with the United States than the country’s very solid export figures would have led one to expect. The purchasing managers’ surveys carried out in Chinese industry in December were worse than they had been for around three years and this morning they were an unpleasant reminder for financial markets around the globe of the worries about the Chinese economy at the turn of the year 2015/16. Both purchasing managers’ indices – the “official” figure of the National Bureau of Statistics of China and the “unofficial” indicator from the private data provider IHS Markit – fell below the critical 50-point contraction threshold at the end of the year. The last time this happened was in February 2016. Against this background, GDP growth will probably have slowed again in the final quarter of 2018. Sentiment among Chinese purchasing managers…

“Made in China 2025”: China’s strategy for the future – a threat to the industrialised nations?

At least since US President Donald Trump declared punitive customs duties on Chinese imports to be a declaration of war against “Made in China 2025”, China’s project for the future has been widely talked about. The objective of the strategy is to fundamentally modernise China’s industry and to put it in a position to produce the high-tech products that the country has in the past had to import. In principle this is an important, indeed a long overdue, step in the right direction. This is because China’s previous growth model – cheap mass production of relatively simple industrial goods – has become outdated with demographic change and the country’s improved level of prosperity. “Made in China 2025” is based on the concept of “Industry 4.0”, the digitisation and networking of industrial production. It is planned that, by means of digitisation, ten selected key industries in China, including electromobility and robotics,…

China: Growth slowed in Q3 – investments are a brake, impact of trade dispute yet to be felt

China’s economy lost steam again in Q3. With economic growth coming to 6.5 percent, it actually weakened somewhat more strongly than expected. Given the way the trade dispute escalated over the summer, the trend for the Chinese economy is no doubt being followed especially closely at present. However, the cooling of the economy can hardly be attributed to trade with the United States having decelerated growth. At the moment, this is still being overshadowed by other factors having been brought forward and is being cushioned by the devaluation of the Yuan. Instead, it is Beijing’s restraint on the investment front that has squeezed growth. In the current quarter, the strain from foreign trade may well become more clearly noticeable. We feel that all this bears out our cautious growth forecast for this year of 6.5 percent. The monthly export figures for the past months in which US customs tariffs were…

Currency manipulation – the theory and the practice

Soon, the US Department of Treasury will be releasing its six-monthly report on currency manipulation. It establishes to what extent the USA’s major trading partners have gained an advantage by unfairly influencing their currencies. In light of the current trade dispute, the report will no doubt attract even greater attention than usual. If the mere amorphous fear of a further trade-conflict escalation led last Wednesday to strong price falls on the US stock exchanges, then imagine how explosive the ultimate challenge to China on the currency front could potentially be. President Trump does not disguise what his stance on China is; if it were only up to him, then China would already have long since been officially branded a currency manipulator. However, forex issues and thus the report in question do not lie in his hands but in those of the Treasury, and the latter applies a clearly defined, quantitative…

1 2 6