China’s economic growth in the
second quarter proved robust while
exports in June were better than expected. Gross domestic product grew by 5.2 per cent between April and June despite a trade war with the United States. That has helped fuel cautious optimism the economy can achieve the full-year growth target of 5 per cent.
Mainland exporters moved quickly to ship goods ahead of the end of a 90-day tariff truce in August, helping the monthly trade figure to a 5.8 per cent jump year on year.
In the coming Politburo meeting, policymakers have to decide whether to extend measures to boost stimulus and consumption, or conserve the ammunition and keep policy options open for the rest of the year. Beijing is focusing on what it calls a
“unified national market”. This means discouraging self-defeating cutthroat competition among low-tech, low-margin companies and counterproductive contests between provinces that often penalise each other’s cross-boundary goods and services.
While the latest data show the economy’s resilience, all eyes will be on the August 12 truce deadline. Will the two sides finalise a deal, as US President Donald Trump claimed they would after high-profile meetings in Geneva and London? Or will he change his mind and make new demands? Washington is in no mood to help Beijing stabilise its economy. But it desperately needs China’s supply of rare earths. Trump is also eager for a meeting with his Chinese counterpart Xi Jinping soon.
Beijing has been wise in approving
exports of critical minerals to the US on a case-by-case basis. Unless there is a viable trade bargain next month, this is unlikely to change.
China has been aggressively diversifying exports to markets outside the US – in Southeast Asia, the European Union, Africa and Latin America. For instance, Chinese exports to Asean rose by 16.8 per cent year on year in June, but those to the US fell by 16.1 per cent. China has agreed to
upgrade a free-trade pact with the Association of Southeast Asian Nations, including extending cooperation to digital and green technologies.
