While financial institutions revise up growth reasons upwards, economists remain divided:
Chief Global Strategist and the director of research at BCA, Peter Berezin (formerly with Goldman and the IMF), commentary:
“The global economy is currently benefiting from a massive rate for the front, as evidenced by the increase in import to the US. This has temporarily stimulated production in places such as Europe, Canada and China. The floor will fall out next week.”
With auto rates with effect from 2 April and mutual rates that are likely to follow, the pre-load effect will fade. Sweep rates also make it more difficult for China to bypass taxes through routes of third parties such as Mexico. This increases the risk of a question step for Chinese car manufacturers and technology companies – although such effects may not be shown immediately in trade data. Instead, business income can offer a clearer measure of the damage.
Risks for the recovery of China
Weaker question can dampen investments and recruitment in China. Rising unemployment in China could limit the effectiveness of Beijing’s stimulus measures, aimed at stimulating domestic demand.
In February the unemployment rate rose from China to 5.4%, an increase of 5.1% in January. It is remarkable that the unemployment of youth in February increased from 16.1% to 16.9% and painted a much gloomy image.
A Beijing response to American rates can cause the fear of a complete trade war in the US china. The Kobeissi letter indicated a potential tariff reaction on 31 March:
“China, Japan and Zuid -Korea will jointly respond to American rates, because President Trump’s 2 April is approaching mutual rate day, per Reuters. Mexico has already announced that there will be a response as soon as 3 April. Wettereral rates for mutual rates are coming.”
Mainland and shares of Hong Kong show resilience
Optimism about Beijing’s policy support has strengthened the demand for shares of Hong Kong and China. The Hang Seng-Index is an increase of 15.25% years to date (YTD), while the CSI 300 from China only drops 1.21%. The Nasdaq composite, on the other hand, has fallen 10.29%.
The CSI 300 0.07% fell considerably in March, while the Hang Seng index 0.78% achieved versus a monthly decrease of 8.21% for the Nasdaq Composite Index. If Beijing succeeds in dampening his most important sectors of American rates, the divergence between Chinese and American stock markets can grow.
However, if Beijing is disappointing or geopolitical tensions escalate, the Chinese markets of Hong Kong and the mainland still have a long way to descend.