The ongoing consistency of weaker US and China economic releases with regards to GDP expansion, is what we have been prepared for over the past six months. Today, China announced Q2 figures which came in at 6.2%, the slowest growth in 27 years as the US-China trade war adds weight economic expansion. From April to June, according to an article on CNBC by Huileng Tan, the China statistics bureau stated that this 6.2% expansion was slower then the Q1 expansion of 6.4% – mind you, many global experts are saying that China growth being reported is less than the official figures. This is a complex situation and of course there are internal issues that must considered as President Xi Jinping as he consolidates his power.
There are Hawks who are ready to take the US head on in all trade talks. Note that trade data on Friday showed that China June exports contracted from a year earlier, while President Xi stands firm on China growth, saying that the 70th anniversary of the nation would be a year of solid growth. Note that exports decreased from China while domestic demand slowed because the local economy is slowing. But here is the shock that many are not focused on. With China exports slowing, there will be negative impact on the supply-chain effects in the rest of Asia, adding to the view that the global economy will slow down.
Our Views: Note that the US and China are playing a waiting game, one that focuses on the amount of damage that can be inflicted on the global economy. China does have one distinct advantage as it is a command based economy with a government that can focus resources on specific sectors. The pace of economic activity can be adjusted in China on key sectors with a fair amount of detail while the US does not have such a system. However, the US has food and energy security, something that China clearly does now have – it relies on selling goods abroad, and importing food and energy to ensure that its economy survives. The waiting game continues, with those outside the US and China spheres being most damaged in the future. China remains tough and stands up to the US ….. a strong move that Beijing is showing the world. Hats off to China !!