The US trade war is chilling China’s consumer confidence and Beijing must step in to spur growth

South China Morning Post | 11/10/2018 | Staff
kshama-s (Posted by) Level 3
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China’s slowdown is not looking good. The trade war with America is dragging on exports, new investment intentions remain sluggish and consumer demand is looking more lacklustre. Beijing has its work cut out breathing new life back into the flagging economy. Unless there is a breakthrough in the trade dispute pretty soon, Beijing will have to stump up much more monetary and fiscal stimulus to speed things along. With the global picture looking shakier, China must stay focused on domestic reflation to prevent a deeper slowdown next year.

China’s economy is definitely losing momentum. Gross domestic product growth should hit Beijing’s target of around 6.5 per cent for this year, but what happens next is critical given the growing global gloom. Consensus forecasts show economists looking for a further mild deceleration, to 6.3 per cent expansion next year, well down on what China has been used to in the past, but with rising risks the outcome could be much worse. The trade dispute with the United States is taking its toll and Beijing needs some answers pretty quick.

Pessimists - Growth - Cent - Year - Government

Pessimists say growth could even be closer to 5 per cent next year if the government is not careful. The solutions are clear. Either Beijing buries the hatchet with Washington and fast-tracks its way to a compromise in the trade war, or refocuses its energies on ramping up home demand. This means massive fiscal regeneration, cranking up deficit spending on key infrastructure projects and pump-priming consumer confidence so China’s households feel much more encouraged to go out and spend. Reinforcing consumer demand could be the quicker, more effective route short-term.

Just like in the US, the consumer has become the backbone of China’s economy, accounting for up to two-thirds of GDP growth. But China’s consumers are being hamstrung by flagging confidence, a less robust housing...
(Excerpt) Read more at: South China Morning Post
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