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China Econometer – December 2018
Wednesday, 16 January 2019 02:38

China Gov’t Moves to Maintain Stability
With as many as 19 provinces in China potentially falling behind their growth targets in Q3 2018, the effects the trade war may have going into 2019 have led to rapid activity from the Chinese government to promote stability in the economy. The decline in key economic indicators has seen some analysts projecting a deflation threat for the economy. November saw a slower than expected growth in China’s monthly exports and imports, as the global uncertainty from the US trade disputes continue. The Chinese government, however, has actively sought to relieve the stress on the economy, by shifting policy priorities from debt reduction to increased efforts to bolstering economic growth.

Key Economic Indicators
The producer price index (PPI) rose 2.7 percent in November y-o-y, compared to the 3.3 percent increase seen in October. The consumer price index (CPI) rose to 2.2 percent in November from a year earlier, a decrease from October’s 2.5 percent and below analysts’ expectations of 2.4 percent. On an m-o-m basis, PPI fell 0.2 percent, after it saw a 0.4 percent gain in October. CPI fell 0.2 percent m-o-m. China’s foreign exchange reserves rose by USD 9 billion to reach USD 3.062 trillion in November, despite expectations of a USD 16 billion decline in reserves. This is China’s first monthly gain in foreign reserves since July this year.

Manufacturing Sector Stalls as New Orders Decrease
China’s official manufacturing purchasing manager’s index (PMI) declined from 50.2 in October to 50.0 in November. Despite analysts’ predictions that the index would remain unchanged from its October position, this index of 50 indicates that there was neither growth nor contraction for this month. The threat of tariffs being raised in January may have spurred the decline in new orders, however with the 90-day period of trade war truce with the US, increased confidence in the manufacturing sector may lead to growth in December and January.

Temporary Truce at G20 US-China Meeting
Chinese President Xi Jinping and US President Donald Trump met during a dinner at the 2018 G20 summit held in Argentina. At the dinner, held on day 150 of the trade war, a temporary truce was announced. President Trump had threatened to raise the existing 10 percent tariff to 25 percent on 1 January 2019, however the truce resulted in a 90-day agreement to not raise or impose new tariffs until 1 March 2019. The two sides are expected continue to work towards creating a larger trade deal, should terms presented by both sides be met within the 90 day period.

This article is produced by The Beijing Axis and is published in The Econometer section of ChinAfrica magazine (January 2019), an English and French language monthly publication that provides news, views and analysis on all things China, Africa and China-Africa relations.