“Don’t Exaggerate Impact of Sino-US Trade War on Chinese Economy:” BOC Analyst

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A leading Chinese analyst is downplaying the potential impacts of escalating trade tensions between China and the United States.

Wang Youxin (王有鑫), a researcher from the Bank of China International Finance Research institute (中国银行国际金融研究) said to Securities Daily that the impacts on China’s economic growth and industrial output of the trade war and external financial volatility should not be exaggerated.

According to Wang depreciation of the renminbi will significantly offset the impact of  tariffs, while certain goods possess significantly ability to “bear” any tariff introductions.

The dependence of Chinese industry on exports on the decline, while the importance of emerging markets to Chinese exports is on the increase.

Wang also points out that there remain strict and effective controls on the entry of foreign capital into the Chinese share market, which plays the role of a “firewall” that prevents any external volatility from significantly disrupting either stocks or corporate credit risk.

According to Wang the Chinese central bank is also launching effective policies for ensuring the stability of domestic financial markets.

“The launch of counter-cylical control measures and other macro-prudential policies is very effectively stabilising market confidence and expectations,” said Wang. “This is setting a firm bottom line for risk, as well as clearly showing the attitude of the central bank, serving as a calmative for markets. Exchange rates are the first to stabilise.”

Wang said that the stabilisation of exchange rates will continue to attract cross-border capital flows, with a continuous increase in the holdings of domestic renminbi stocks and bonds by offshore institutions since the start of the year providing considerable support to capital markets.

Wang Qing (王青), chief macro-analyst with Dongfang Jincheng (东方金诚), said that since the end of August the Chinese central bank had unveiled a slew of policies to achieve overall stability in onshore and offshore renminbi rates, as well as successfully stabilise market expectations and contain pro-cyclical tendencies.

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