China

Trump ups the pressure on China

So here it comes after all: Donald Trump is really tightening the thumb-screws in the trade conflict and has announced further, extensive punitive tariffs on products that America primarily imports from China. They entail restrictions on Chinese imports worth USD 60 billion, which is more than 10 percent of all US imports from China and therefore certainly no longer just “peanuts”. By contrast, the customs duties on steel and aluminium in force from today onwards only marginally hurt the Chinese economy. China may be the world’s largest producer of steel, but Chinese steel exports to the USA have long since been significantly depressed by anti-dumping measures. Together with exports of washing machines and solar panels, on which the US government imposed punitive tariffs many weeks back, they only add up to about one percent of all Chinese exports to the USA or less than 0.1 percent of Chinese GDP. The…

Toxic mixture: China faces major challenges

Xi, China’s man of power, is now even more powerful. A few days ago, he was unanimously confirmed in office for another five years by the Chinese National People’s Congress. Prior to this, parliament had lifted the restriction for presidents to two legislative periods. Xi, however, is braced for an extremely difficult term of office. He must be careful that China does not become the next Lehman case. One example of the current difficult situation is the consequences of the one-child policy, which is becoming more and more dramatic. The country could be left with an overaged population. According to a report by the Beijing-based China Renmin University, the Chinese working population aged 15 to 59 has declined by 20 million people in the last five years. The researchers expect the working population to shrink from its former peak of 925 million in 2011 to 700 million by 2050. China…

US-Chinese trade conflict: In the final instance there will be a solution at the negotiating table

With the latest round of punitive customs US President Trump has massively increased tensions on the trade-policy front. A trade war now seems tangibly close. At the moment, it is the conflict with the EU which is more in the limelight. However, Trump’s focus has always been on China – the US’s most important trade partner and responsible for about one half of the high US trade deficit. China in turn exports four times as many goods to the US than the other way round. It would be wrong to conclude that China is the more vulnerable partner in a trade war. US customs on the countless consumer goods imports from China would above all hit the US consumers. Beijing, on the other hand, could in many ways make business life in China difficult for US companies. Trump is not quite unjustified: Since China’s accession to the World Trade Organization…

China’s debt levels – a stumbling block threatening the good global economy

China’s debt levels are perilously high and have swollen such as to constitute a considerable threat to the country’s economic and financial stability – of this there can be little doubt. At over USD 29 trillion, China’s mountain of debt is the second highest in the world, with the debt ratio running at more than 250 percent, immense for an emerging economy, and its rise by over 100 percentage points over the last decade is gigantic. It is no coincidence that the IMF and BIS have for some time been drawing parallels to countries whose excessive debt eventually ended in crises: Japan in the 1980s, Thailand in the 1990s or Spain after the turn of the millennium. China could likewise be heading for a crisis. What is above all critical is the high corporate sector debt, which at over 160 percent of gross domestic product (GDP) is quite unprecedented the…

VDAX jumps above 40 points – uncertainty as great as after the Brexit decision in 2016

Until two weeks ago, volatility on the financial markets appeared to be a thing of the past with little or no action on the equity markets. This has changed within the space of a few days. The VDAX, which is derived from the DAX option contracts traded on Eurex and measures the expected volatility of the DAX for the next 30 days, closed above 40 points. If the expected volatility is interpreted as a stress indicator, the uncertainty on the German equity market is currently as high as it was at the time of the Brexit decision in June 2016 or after the Chinese equity market crash in August 2015. Investors who now expect the volatility on the equity market to fall again soon towards the average (19 points in the US / 20 in Germany) could be disappointed at first. Empirically, the volatility suggests a slight tendency towards a…

China’s economy performed well in 2017 – and Peking will also keep growth at a high level this year

China can look on a good year for the economy in 2017: GDP growth increased slightly on the previous year to 6.9 per cent – for the first time in seven years the growth rate for the full year accelerated again. In the final quarter the growth rate remained stable on the third quarter at 6.8 per cent. The upswing firmed. The Chinese economy benefited above all increasingly from the buoyant global economy. After two very difficult years foreign trade was no longer a brake on economic growth in 2017, and in the final quarter it even made a positive contribution to growth. Admittedly, in the second half of the year economic growth failed to keep up completely with the strong momentum of the first half of the year. The boost from state investments, which initiated the upswing in 2016, has slackened off further and in the private sector investment…

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