President Trump claims credit for China’s slow growth
In a tweet on January 21, President Donald Trump claimed credit for China’s slow growth. He tweeted, “China posts slowest economic numbers since 1990 due to U.S. trade tensions and new policies. Makes so much sense for China to finally do a Real Deal, and stop playing around!”
China’s economy slows
China (FXI) released its GDP data for 2018 on January 21. Its economy recorded growth of just 6.6% in 2018, its slowest pace since 1990. Its pace of growth in the fourth quarter was even more dismal at just 6.4% year-over-year. Last time China saw a worse quarterly performance was in early 2009 at the height of the financial crisis.
President Trump is trying to use the bait of growth to bring China in line. The ongoing trade talks between the two nations are progressing well, but not many market participants are hopeful for a comprehensive trade deal by the March 2 deadline.
China’s structural issues
Moreover, even if a trade deal is reached, the Chinese economy isn’t expected to make a U-turn in any significant way. Investors’ sentiments could bounce in the short term, and the Chinese economy might see slight relief in the long term, but China needs to work on its domestic demand, which has developed structural problems. Read China’s Slowdown Could Be More Severe than Expected for more on this.
The trade war doesn’t seem to have benefited either China or the United States (SPY) (DIA) so far. Apple (AAPL) recently stated that its iPhone sales in China had slumped more than expected. In addition, companies such as Amazon (AMZN), Microsoft (MSFT), Netflix (NFLX), Facebook (FB), NVIDIA (NVDA), and Alphabet (GOOG) are also being negatively affected by the ongoing trade conflict.