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Gerard Burg, Senior Economist at NAB, suggests that we are yet to see any clear signs – at least outside of survey measures – of any significant impact from US trade measures on Chinese economy.

Key Quotes

“This may change as the range of goods covered under tariffs (likely) expands in coming months.”

“In the meantime, Chinese authorities appear to be fighting the trade war on many fronts – including increasing tax rebates for exporters, loosening restrictions on infrastructure investment and easing monetary policy.”

“In addition, the currency has also depreciated significantly – down around 7% since the start of June – increasing the competitiveness of Chinese exporters. Our forecasts for China’s economic growth are unchanged – at 6.6% in 2018, 6.25% in 2019 and 6.0% in 2020.”

“China’s industrial production increased by 6.1% yoy in August – marginally above the 6.0% recorded in July.”

“There was a modest increase in real fixed asset investment in August – up by 0.7% yoy, compared with a decrease of 0.9% yoy in July.”

“China’s trade surplus was virtually unchanged in August – totalling US$27.9 billion. So far we are yet to see any impact from US trade measures (or retaliatory Chinese tariffs) on the US-China trade relationship.”

“Exports to the United States increased by 13.2% yoy in August – a larger than average increase – to an all time high of US$44.4 billion.”

“Real retail sales growth slowed further in August, to 6.4% yoy – the slowest rate of growth since May 2003. Despite the softening trend in sales, consumer confidence has remained robust – moving up in July to 119.7 points (compared with 118.2 points in June).”

“The pace of China’s deleveraging program appeared to slow in August – with aggregate financing declining by just 2.4% yoy in the month.”

“Chinese monetary policy has eased in recent months – possibly to provide additional support to the domestic economy. While the 7 day Shanghai Interbank Offered Rate (Shibor) has trended higher since mid-August, it is around 20 basis points below the rates in June – at around 2.65% in early September.”

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