China will likely wait out the trade war as it bets on its own economy
August 30, 2019 @ 12:31 +03:00
China’s best option in the trade war is to wait it out, experts say, as it’s huge domestic economy is increasingly being driven by the power of its consumers — not trade. Playing the long game is “probably the best and only option” that China has, said Chung Man Wing, investment director at Value Partners.
As trade tensions with the U.S. draw out, the world’s second largest economy will likely seek to beef up its domestic economy, which contributes more to growth than its exports, according to analysts. “The (Chinese) government is trying to buy time in terms of using the window to restructure the domestic economy … the domestic corporate sector,” Chung told CNBC on Thursday.
External trade make up only a “very small portion” of China’s economy — and form only about 20% of its gross domestic product, he said. “And majority of that is actually not to the U.S., so China can afford to play the long game, and play it well.” In fact, Deutsche Bank said in a Wednesday report that as much as 80% of China’s exports went to countries other than the U.S.
Meanwhile, Beijing appears to be also betting on its own economy. On Tuesday, it unveiled measures to boost consumption, including the possible removal of restrictions on auto purchases. China’s State Council added it would encourage commercially struggling malls, stadiums and old factory zones to be transformed into commercial complexes, gym and entertainment centers. It said Beijing will be extending retail hours to promote “the night economy,” with convenience stores and restaurants staying open longer. Meanwhile, China will also try to diversify its supply chains and accelerate its opening up to other countries – reducing its reliance on the U.S. in the longer term, said the Deutsche Bank report.
China will likely wait out the trade war as it bets on its own economy, CNBC, Aug 30