China Economic Review

Summer lull

It’s the end of summer, and the last week has been, relatively speaking, something of a lull. But not a lull in normal terms. The trade war with the United States appeared to be moving towards more serious territory, and although no one can predict what Trump’s next tweet might be, there is a sense that tariffs and other measures are going to be implemented in spades.

The sense of Beijing, meanwhile, is that they have decided that the US’s moves are aimed at forcing the Chinese leadership to make fundamental systemic changes and a bunker mentality is setting in. How do and will the Chinese “electorate” react to this Well, it applies most directly to those with assets, and after the summer break our prediction would be that the pressure on the RMB, Shanghai stocks and the property market will rise once more. The rosiest part of China’s economy is the tech sector, but even there, investors are signalling a new reluctance to buy the story.

Lastly, there is the big Africa investment meeting coming up next week in Beijing, with dozens of African leaders due to turn up. China gave out a massive $125 billion in loans to African countries between 2000 and 2016, taking advantage of the fact that Western governments remain reluctant to lend on that scale. The extent of China’s willingness to be more benevolent on loan terms – a growing issue – and its determination to hold to the big-spending approach – a growing question – will become clearer during the meeting.