Those of you who read our opinions on how the trade war with the US is affecting China will know that one of main concerns is about the relationship between the government and the people in China. This week, Xi has echoed that warning. The Chinese leader stressed the need to maintain political stability in the face of economic challenges. The warning, which came at an unusual meeting of Chinese leaders, shows the ruling party’s anxieties over the social implications of the slowing economy.
FINSUM: Chinese leadership is in a tight jam. On the one hand they have the US squeezing them with tariffs, and on the other, they have the need to maintain the economy’s strong growth to keep people happy. Remember that leaders are unelected, so their grip on control is very tied to keeping everyone satisfied.
Markets are taking bad news out of China hard. New data out of Beijing shows that the country’s exports dropped sharply in December. The figures suggest a global slowdown, and a brutal trade war with the US are taking their toll on the Chinese economy. Exports fell a whopping 4.4%. China also held a $323 bn trade surplus with the US, the largest since 2006. Imports fell 7.6%, showing how much the slowdown in China was affecting demand. Car sales in in the country also declined for the first time since 1990.
FINSUM: The tariffs are working, but there is a larger issue at stake—the US and the world’s relationship to China. There is a lot of strain being put on the country, and we are concerned about how the government there will react.
Happy new year—the Dow opened down 350 points this morning on fears over a Chinese slowdown. New data is out of the country which shows that Beijing’s manufacturing sector is contracting, a sign that tariffs may be flowing through to the economy. That makes markets hope more than ever for a trade agreement between the US and Beijing, which would likely alleviate the economic strain. The S&P 500 has fallen 20.2% on an intraday basis, an official bear market.
FINSUM: The implications of a big Chinese slowdown are serious. Firstly, how does the country react politically to what they likely view (or will project) as a US-imposed slowdown? Secondly, how much does the slowdown drag down the global economy?