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U.S. and EU is de-risking China, but Beijing insists its economic policy, and industrial subsidies policy which has been implemented for ling time raised the concern of the western.
China’s economic challenges have given rise to deflationary pressures that present a global concern and are likely to accelerate in the coming quarters. The stimulative measures are far less sufficient to push the economic recovery.
Data in terms of sales of China EVs exported to Europe has shown some signs of sluggishness although policy of tariffs has not yet been implemented by EU.
Theoretically, EU can only curb cheaper China EVs' flooding into European market by imposing 50% higher tariffs.
Central Political Bureau Economic meeting in April. 2019 indicated that domestic economy is facing downward pressure, which is mainly caused by cyclical, structural and systimic factors.
In October last year, the IMF had lowered its growth forecast for China to 5% this year and 4.2% next year.
Fitch forecast China’s economic growth would slow to 4.5% in 2024 from 5.2% last year, while the International Monetary Fund expected China’s GDP to grow 4.6% this year. The ratings warning comes despite tentative signs China’s economy is finding its footing.
China’s economy grew by a better-than-expected 5.3% in the first quarter, supported by strong exports. Data for April showed consumer spending remained sluggish, while industrial activity picked up.
China is facing a confidence deficit as its economy undergoes massive transition and concern grows over its ongoing property crisis.
Over the last few years, EVs manufactured by China automakers were flooding into European market. Data showed that EVs from China licensed in Europe increased 23% year to date from January to April, albeit EU would impose higher tariffs on EVs imported from China.
Deteriorating China economic fundamentals have produced deflationary pressures that are already moderating inflation both in China and in the global markets served by Chinese goods.
Real estate, which once contributed to at least a quarter of China’s economy, remains a drag, despite a growing number of cities easing purchase restrictions.
By in large, economic transition is the most pressing issue that China govrenment must grapple with. Whether or not successful economic transition will absolutely determine the future of China economy.
In order to rescue the embattled real estate industry, China government announced “historic” steps in mid-May to stabilize the sector as well as easing purchasing restriction.
This has put China government in an unenviable position. Right now the only avenue for China is to keep huge amount of trade suplus, but America argues that other countries should not bear the consequences of ill-prepared of China policy.
In recent years, the solar panel, EVs and lithium battery made from China has aggressively flooded into European market.
