The Asian Development Bank lowered China’s 2019 growth forecast from 6.4% to 6.3%. For 2018, growth projection was kept unchanged at 6.6%. It cited “slower demand growth and an unfavorable trade environment” as the reasons for the downgrade. On US-China trade conflict, ABD said it could “deflate consumer and investor confidence, severely disrupt supply chains, impede technology transfer and foreign investment, and hit export-oriented industries in the PRC. ”
ADB Chief Economist Mr. Yasuyuki Sawada said, “services and consumption will continue lifting the PRC’s economy for the rest of 2018 although slower growth is expected next year, as ongoing trade tensions with the United States (US) are expected to affect net exports.” He added that “supportive monetary and fiscal policy will help ease the short-run strains” But also urged that “continued reform progress is needed to sustain future growth.”
Looking at the details, net exports are expected to hold back GDP growth for the rest of 2018 and 2019 as ” trade tensions with the US continue to intensify, coupled with a dimmer outlook on global trade and investment activities.” ADB expected current account surplus of China to lower to 0.7% in 2018 and further down to 0.2% in 2019.
For developing Asia as a whole, growth in 2018 is expected meet 6.0% forecast. However, 2019 growth projection was also trimmed by -0.1% to 5.8%. The US-China trade measures implemented by September 24 are expected to lower China GDP by -0.5% and US GDP by -0.1%. And they would have a “negligible effect on the rest of developing Asia”. It also noted that “with the trade conflict escalation, the US trade deficit with the PRC would shrink, but the overall US trade deficit would not change much as US imports would be redirected to other countries while US exports to the PRC declined.”
Also, ADB warned that “prolonged trade conflict can damage confidence and deter investment. This indirect fallout will be large for many economies in the region and globally, especially if automobiles and other parts become embroiled in the trade conflict.”
ADB’s press release on China here.
The Asian Development Outlook 2018 update here.
DIHK: US-China trade conflicts have huge impact on German companies
A survey by the German DHIK Chambers of Industry and Commerce warned that escalating US-China trade conflict is already hurting German companies.
41% of German companies doing business in China said they were affected by higher tariffs when exporting to the US. And 46% said highest cost importing from the US.
57% of German companies doing business in the US said there were negative effects exporting to China. 75% reported higher costs when importing from China.
DIHK trade chief Volker Treier said “the dangerous trade dispute between the U.S. and China is also hitting German companies doing business in the two countries.” He added, “the impact is huge: nearly half of the imports from German companies are directly or indirectly affected by the new tariffs, for example because they source raw materials or components from the other country.” He also warned that “a further escalation of the dispute would be a threat to world trade as a whole.”