Trade War
Welcome to the 174th edition of Trade War.
China’s second quarter GDP grows a slower-than-expected 6.3 percent and deflation fears spread. And faced with bad economic news, Beijing vows to support private business and regulators reassure venture capitalists.
Chinese hackers target U.S. Ambassador to China Nicholas Burn’s email. And in a pointed message to Washington, Xi Jinping gives Henry Kissinger the royal treatment.
Black market tutoring takes off in China. And cattle wander half-finished mansions in Chinese ghost town.
And just what is economic coercion?
“It is the use of economic tools to enforce political costs . . . [Countries like China] use either their market or their power in a particular sector to inflict political pain and economic pain and to coerce your behavior. And it is the most persistent and pernicious economic tool they have,” U.S. Ambassador to Japan Rahm Emanuel tells the author of this newsletter, in a recent interview.
New role at University of Montana’s Mansfield Center
I am delighted to announce my new role as Director of China Affairs at the Maureen and Mike Mansfield Center at the University of Montana - I'm looking forward to building a great China program here in the Rocky Mountain region.
And stay tuned to Trade War for your China news and to hear about the great speakers we are lining up at the Center over the next year.
China’s Q2 growth misses expectations
China’s economy grew at a slower-than-expected 6.3 percent in the second quarter, raising the specter of deflation and putting Beijing’s full-year GDP target of around 5 percent at risk.
Quarter-over-quarter, GDP was up only 0.8 percent, while Beijing’s hoped-for consumer spending didn’t materialize, with retail sales rising 3.1 percent in June from a year earlier—down from 12.7 percent growth in May. Youth unemployment continued its record-breaking climb to reach 21.3 percent.
“Underlining the weak sentiment, fixed asset investment by private companies declined in June and the household savings rate remains elevated,” reported Bloomberg News.
“What we all expected was a consumption and service-led recovery. If that is sputtering, then there’s no engine left for the recovery,” says S&P Global Ratings Asia Pacific economist Louis Kuijs. “We never want to read too much into one month’s data. But if the June data on consumption is representative, then that’s not a good sign.”
Citigroup economists lowered their China growth forecast to 5 percent, down half a percentage point, while Morgan Stanley reduced its forecast also to 5 percent, down from 5.7 percent before.
The “risk of deflation is serious,” warned Pinpoint Asset Management chief economist Zhiwei Zhang.
Trying to put a brave face on it, the National Bureau of Statistics said in a statement that China’s economy showed “good momentum of recovery,” but also cautioned that “the foundation for sustained economy recovery at home is not solid yet.”
Beijing vows to support private sector
As China’s economy struggles, Beijing has announced new measures to support the private sector.
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