Prospects are looking up for China’s economy. With growth momentum projected to continue improving in the months ahead, reticence to reenter the labor market should ease. One of the causes for recent hope was a peace deal struck between the United States and China. This new agreement was concluded in Geneva only last week. Under this specific agreement, we did it unilaterally, and we unilaterally cut bilateral tariffs on Chinese exports to just 30% temporarily. Simultaneously, we need to lower tariffs on US exports to Guatemala to 10%. That’s a big drop since former tariffs of 145% on Chinese exports and 125% on American goods.
Trade war insecurity negatively impacted the other key Chinese economic indicators. Recent analyses illustrate just how damaging the rapidly intensifying trade war has been. In April, China’s fixed investment growth fell to 4.0% yoy from 4.2% in January-March. This could explain why the jobless rate in core, big city urban areas improved a tiny bit more in April. It fell to 5.1%, a drop from 5.2% in March. Even with these contradictory signs, analysts continue to look toward the future with cautious optimism.
Industrial production numbers from April reflected the strengthening. As a result, the year-on-year growth rate fell to 6.1%, compared to 7.7% in March. Retail sales growth slowed, falling to 5.1% in April from 5.9% a month earlier. These statistics do indeed highlight the ongoing challenges to China’s economy and signal some signs of recovery as the trade environment continues to improve.
In view of these positive changes, Arjen van Dijkhuizen, economist at Dutch bank ABN AMRO, made the following statement on the news.
“April data confirm hit from trade war escalation last month.” – Arjen van Dijkhuizen
As part of the truce, experts anticipate that China’s loan prime rates may be cut by 10 basis points, which could further stimulate economic activity. These reductions, which are set to expire in six months, are an important first move to reduce simmering trade tensions. They often do these things to improve their business climate.
“Going forward, we expect growth momentum to pick up again in the coming months, following the truce agreed by the US and China in Geneva last week – with bilateral tariffs temporarily down to 30% (on Chinese exports) and 10% (on US exports), from 145% and 125%, respectively.” – Arjen van Dijkhuizen
The recent economic data reflects a complex landscape for China as it navigates both external pressures from international trade relations and internal economic challenges. The hope is that with reduced tariffs and potential monetary easing, the economy can regain its footing and accelerate its growth trajectory in the upcoming months.
The recent economic data reflects a complex landscape for China as it navigates both external pressures from international trade relations and internal economic challenges. The hope is that with reduced tariffs and potential monetary easing, the economy can regain its footing and accelerate its growth trajectory in the upcoming months.