China’s first-quarter economic performance vindicates Beijing’s approach to Trump tariffs

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OPINION

By Joshua Kingdom

China’s National Bureau of Statistics (NBS) has finally released the much-anticipated data on the performance of the country’s economy for last month. Ordinarily, the results should not be a big deal, as China has been rather consistent for some time now.

In this case, however, everyone was looking to see how things turned up because the United States President had made it an absolute priority to frustrate Beijing during the beginning months of his term. What the statistics have shown, however, is a picture far distant from this vision.

NBS’ monitoring tracked all the indicators of growth, and one after another, they revealed a country that is only going strong. Figures for the year-on-year industrial production, fixed-asset investment, retail sales, and consumption increased by 6.7%, 4.2%, 6.1%, and 5.1%, respectively. For the case of imports and exports, growth was capped at 8% while urban unemployment declined by 5.2% and inflation remained stable at 2.5%.

Since numbers do not lie, one can confidently say that this turn of events may well be the first vindication for the measures that the Chinese Administration adopted in the wake of Washington’s offensive. The latter party might have won on rhetoric, but as it turns out, strategy and foresight seem to have prevailed after all.

We remember succinctly, for instance, that while warning that trade wars do not benefit anyone, President Xi took measures such as export tax rebates, providing financial support for Chinese export companies, as well as solidifying domestic production in the face of an adamant adversary.

With Trump’s government already making concessions as substantial as the recent tariff talks in Geneva, then, the NBS statistics can be seen as just one of the many hard facts that are starting to give China the edge in the new international economic dispensation.

Financial institutions such as Goldman Sachs are one other example of these projections (and they are as conservative as you can get on this issue). Morgan Stanley economists have thus gone back on their word regarding how much supplementary package China will need by the fourth quarter. They have lowered their initial estimate ($280) by more than half.

Naturally, this leads to the “what next” question. For China, there is no doubt that it will thrive following the outcomes in Geneva, as it has done so even prior.

The main strength that she carries here, though, is that she comes to the table on her terms, i.e. its economic policy will mostly proceed as the Communist Party of China (CPC) intends it to. That way, the would be uncertainty will be corrected for as the different domestic players do not have to overly rely on the mercy of what the US decides to do, which, as history has shown, is not a good way to formulate policy.

But other China is hedging itself too. For this case, the CPC has introduced special treasury bonds looking to increase government expenditure and help support vital projects. $140 billion has already been injected into the process.

Cao Yuanzheng of the China Economic 50 Forum has pointed out that within three months (which is not far off in the future), the impact of the bonds will have begun to be felt.

Given this combination, it is expected that China’s economy will grow by an impressive 5.1%, which is approximately the size of the entire Switzerland during the second quarter of the year. For context, the Swiss operate the 20^th largest economy world over so it is a serious expansion that we are talking about. Add to that the fact that China has had to endure times as difficult as it has, and you can bet that whichever eventuality comes after the ninety-day settlement with Washington, the Asian economic powerhouse will be even better positioned.

In terms of the global picture, it is anticipated that China’s contribution towards general economic development will reach a high of 35% at the end of the year, which is again a testament to the country’s dynamism. This, too, is an improvement of 5% from what it was last year.

Looking back, it was always clear that President Trump’s approach to China was mistaken. Projections are one thing, however, and reality another. Now that China’s performance aligns with the predictions, however, there is a much stronger case for Xi Jinping and his team.

The writer is a research fellow at the Development Watch Centre