Trade War Would be Toxic for Chinese Economy

With Chinese growth likely slowing, the economy's enduring dependence on exports means a trade war would inflict serious damage

Stephen Ellis 25 April, 2018 | 8:51AM Preston Caldwell

China's Xi Jinping

A rise in US-China trade tensions highlights the enduring role of trade in the Chinese economy. While the situation is fluid, a collapse of trade anywhere near the magnitude of the post-2008 financial crisis decline would be unmanageable for the Chinese economy, in the view of Morningstar analysts. This time around, with the debt/GDP ratio at 261%, a compensatory investment boom is out of the question.

Despite official real GDP growth unwavering at 6.8%, we believe growth more than likely slowed further in the first quarter, continuing a trend that began in the second half of 2017. Our broad index of real activity grew just 5.7% year over year in the first quarter, having recently peaked at 7.3% year on year in the third quarter of 2017.

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About Author

Stephen Ellis  Stephen Ellis is a senior stock analyst on the Energy Team.

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