Chinese Economy Gets Hit By The Prevailing US China Trade War

The US - China Trade war is having a substantial impact on the Chinese economy as well as the global front. With no concessions with respect to an agreement between the two countries, things are worsening and hence leading to the requirement of quick solutions to the prevailing problems. 

BY SIRJAN KAUR KOHLI                                                                                                 5 Min Read

Recent data shows that the Chinese economy is getting affected for the worse amidst the ongoing trade war with the United States which has affected consumer trust and sale of goods in the country.

China is facing a certain degree of economic pressure which is pressurising the Chinese President Xi Jinping to come up with a deal that ends the ongoing trade war between the US and China. Certain analysts are saying that if the two countries come to common terms, there is a massive possibility that the increase in US Tariffs early next year will be put on hold. The Chinese economy has been facing a downfall in various sectors including real estate, manufacturing and trade. The huge market for automobile goods, smartphones, televisions and other electronic goods is also suffering. Even big firms like Alibaba are facing decreases consumer demand and are going through a slowdown.

Meanwhile, China’s imports of integrated circuits, chips that go into smartphones, computers and other electronic devices, as well as high-end industrial and military products, have also slowed.

China's quarterly growth was recorded at a 26year low. Also, the fight between the two countries and the escalating retaliatory tariffs are having a massive impact on the global economy as well considering that the two countries are the biggest economies in the world. The IMF reported that this war shall cut its global economic growth forecast by a 0.2%, i.e. from 3.2% to 3%.

This has led to increased uncertainty and reduced confidence on Investment in the market.

The decline in China's trade with US has been evident and considering that the Chinese market substantially exported cheap priced products to the US in huge quantities highlights the impact of the trade war on the economy of China. Both the sides have stood intact on their sides of the deal allowing very less room for negotiations and concessions. However, considering the hit on the Chinese economy amidst the prevalent trade war, there is a propensity for China to settle for negotiations sooner to revive or stabilise the growth in their economy. However both sides are currently and also will be in the future suffering from losses provided things don't take a positive turn any time soon and the dust doesn't settle.

The chances of a full blown trade war are increasing. China and the United States have the most at stake, and it is imperative to reach an agreement that deals with and takes care of key issues like market access, property rights, and joint-venture technology transfer.

Other than the trade tensions with the US, there are certain other factors that can be held responsible for the current situation of the Chinese Economy.

A substantial part of the current slowdown can be blamed on domestic factors, such as a reduction in consumer spending and slower growth in infrastructural expenditure. The country’s corporate profits are also affected, and local governments have also been struggling to pay back loans, creating the vicious cycle of a debt crisis.

It remains to see what shall happen in the next meeting between US and China related to their trade relations scheduled in December and the impact of the further negotiations or decisions made.