Data points to slowing economy . . .
China’s National Bureau of Statistics released data today that shows the country’s second quarter economic growth at a year-on-year rate of 6.2 per cent - the country’s lowest in 27 years. The first quarter of 2019 fared only marginally better, at 6.4 per cent. In comparison, the average growth rate from 1980 to 2010 was 10 per cent. Most economists agree that even though a paced slowdown of the Chinese economy was expected, the trade war with the U.S. seems to have triggered a definitive slowdown.
No quick fixes . . .
There is evidence that economic difficulties may continue. For example, China’s corporate bond defaults tripled in the first quarter, Huawei is planning extensive layoffs in its subsidiaries in the U.S. in the wake of sanctions and severe restrictions for its production lines, and China’s Central Bank is already easing monetary policy to stimulate the economy. Prominent Chinese economists have called for extensive structural reforms to ease the weight of an extremely overburdened Chinese state and to attract more foreign investment.
Changing trade trajectories . . .
The U.S.-China trade war has altered trading patterns across the globe. The Association of South East Asian Nations has replaced the U.S. as China’s second-most important trading partner, after the European Union. U.S. exports to China plunged 30 per cent in the first half of 2019, while Canada’s exports to China fell by a similar percentage in the year until May. If this trade trend continues, North American exporters could face significant headwinds for years to come.