, 8 tweets, 2 min read Read on Twitter
#China economy: ‘worst is yet to come’ with trade war tariffs likely to escalate, Nomura economists say - High debt levels restrict Beijing’s room to manoeuvre on monetary easing, with better-than-expected first quarter growth proving ‘illusory’ scmp.com/economy/china-…
For China’s economy, already bruised from the trade war with the United States and a series of sluggish data, “the worst is yet to come” in the second half of this year, Nomura analysts have warned.
The economists, led by Lu Ting, said that the better-than-expected 6.4 per cent growth in China’s economy in the first quarter, was a blip that “proved to be illusory”.
The January-to-March period was driven by record-high exports, in part because Chinese and American companies sought to “front-load” the shipment of goods to avoid higher tariffs threatened by the US.
If China expands fiscal policy further and allows local governments to borrow more, it would significantly boost the size of the nation’s debt, which, in turn, would put downward pressure on the yuan’s exchange rate.
Manufacturing investment, particularly from the private sector, is a major contributor to the country’s economy. But as the trade war bites, many Chinese manufacturers are considering moving their factories out of the country to avoid US tariffs.
“In the second half [of 2019], China will face even more uncertainties related to the US-China trade war, Beijing’s stance on property markets, and on the size of stimulus,” Nomura said in its report on Tuesday.
“The economy remains under a broad deceleration trend for now,” he said. “Data are bad, and will get worse, but not bad enough for stimulus to escalate any time soon.”
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