China is facing significant trade tensions with the US, including a 100% tariff on electric cars. The threat of new tariffs from the US remains a concern for China’s economy, with analysts believing that more substantial demand-side policies are needed to support consumption.
China’s Economic Stimulus Measures and Trade Tensions with the US
Background
The US has threatened to impose new tariffs on Chinese goods, potentially raising the overall tariff to 35%. A poll of economists by Reuters predicted that new US tariffs could hurt China’s growth by up to a percentage point.
Recent Measures
In September, Beijing injected liquidity into the banking system worth 2.7 trillion yuan ($370 billion, €350 billion) to encourage lending and cut interest rates. This was followed by a further boost of 10 trillion yuan in October to help ease debt crises among regional governments.
Analysts’ Views
Many analysts believe that Beijing is still underestimating the size of local government debt and that the recent measures do not go far enough. George Magnus, a research associate at the University of Oxford’s China Centre, thinks that the latest raft of measures will only have a “marginal effect” on growth.
Tariff Threats
Stimulus Package
Earlier this month, the Chinese government unveiled a stimulus package worth 10 trillion yuan to help ease a debt crisis among regional governments. This move sparked a short-term rally in Chinese stocks, with the CSI 300 index soaring by 35%.
Trade Tensions
China faces significant trade tensions with the United States, including a 100% tariff on electric cars. The new US tariffs could hurt China’s growth by up to a percentage point, according to a poll of economists by Reuters.
Conclusion
While recent measures have sparked a short-term rally in Chinese stocks, analysts believe that more substantial demand-side policies are needed to support consumption. The threat of new tariffs from the US remains a concern for China’s economy, and future stimulus packages may need to focus on social welfare spending and help for the real estate sector.
