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Trump trade war not only thing slowing China economy



China economy
woman shops at a supermarket in Beijing, China, October 15,


  • China’s economy grew at its slowest pace in a decade in the
    third quarter. 
  • But even after the US and China placed hundreds of billions
    of dollars’ worth of tariffs on each other, exports have held up
    better than expected.
  • Economists say the slowdown is partly due to a deleveraging
    campaign started last year.

As the Chinese economy slows,
economists say trade tensions are only part of the

Gross domestic product in China
expanded at its

weakest pace

in nearly a decade in July
through September, with growth in the manufacturing sector
slowing to a near standstill. Meanwhile, the

Shanghai Composite

down about 25% this year.

But even in the face of hundreds
of billions of dollars worth of tariffs between Washington and
Beijing, exports have continued to hold up better than expected.
In October, China
shipped 11% more products out of the country than a year earlier,
according to
a Reuters poll
, slower than the previous month’s 14.5% export
growth, but faster than August’s 9.8% rise. 

The US was the destination for
about 18% of Chinese shipments in 2017. 

That’s a large enough portion of exports that
they can’t be easily made up, according to Brad Setser, a senior
fellow on the Council of Foreign Relations and former economist
at the Department of Treasury, but it’s possible. 

“You would sort of expect that supply chains would reorganize,”
Setser said. “But that’s going to take some time.”

To be sure, exports may have received a boost
from a

weaker yuan

and companies rushing orders
ahead of expected price increases.

But economists say it also shows the slowdown
this year is in largely thanks to a state-led deleveraging
campaign that was started last year in attempt to deal with
excess debt. Most notably, authorities had attempted to crack
down on risky lending as part of the program.

Stephen Roach, a senior fellow at
Yale University’s Jackson Institute of Global Affairs and the
former chairman of Morgan Stanley in Asia, said tariffs will
exacerbate the policy-engineered slowdown that’s already in
place. But that doesn’t necessarily mean there is enough pressure
to force meaningful concessions anytime soon.

“It’s a tough combination,” Roach

“Does that mean that they’re
about to capitulate and cut a deal as the Art-of-the-Deal
president seems to be hinting at? I think that’s dubious at this
point, especially if the US is looking for a deal on these core
strategic issues that have driven a wedge between us.”

In addition to reducing the trade
deficit, the White House has also called on Beijing to address
intellectual-property-theft rules and its Made in China 2025
program. With analysts skeptical that Chinese leader Xi Jinping
will easily budge on those economic reforms, a deal with
President Donald Trump at an expected meeting this month appears

The US has placed import taxes on
roughly half of China’s exports to the US, and Trump has
threatened to increase tariff rates and extend those to all
shipments from China. Beijing has retaliated, but doesn’t import
enough from the US to match duties dollar-for-dollar. China sold
about $506 billion in goods and services to the US in 2017, while
the US sold roughly $130 billion worth to the Chinese.

“China can outlast the U.S. in an
extended trade war, but only if voters here react negatively to
it,” said Gregory Wawro, a political science professor at
Columbia University.

“That seems to be what Beijing
has banked on, but so far the reaction seems to be muted even
among those who are experiencing some pain due to the

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