China: Negative impact of tariffs could be offset by policy measures - ING

Iris Pang, Economist at ING, suggests that the expected negative impact of US tariffs on China's trade and manufacturing activities could hurt GDP growth in the third quarter.

Key Quotes

“Another 25% tariff on $16 billion of goods from the US and from China should start 23 August.”

“The Chinese government has realised the potential damage and has put in place fiscal stimulus and monetary easing, which include targeted RRR cuts and lowering interest rates from SHIBOR to deposit rates for government deposits at commercial banks. The central bank has also warned about the speed of the yuan's depreciation to avoid capital flight.”

“We believe that the government's pre-emptive policies will be able to offset some of the negative impact from tariffs.”

“We expect the central bank to allow SMEs to get more liquidity from banks by relaxing macro-prudential assessment parameters and targeted RRR cuts so that the credit costs on SMEs can be reduced.”