Fri, Nov 16, 2018 - Page 12 News List

Trade dispute to have limited effect on China, S&P says

By Crystal Hsu  /  Staff reporter

The US-China trade dispute will have a limited effect on China’s GDP growth, which has become increasingly dependent on its domestic market, Standard & Poor’s Global Ratings said yesterday.

The US and China are Taiwan’s largest trade partners, accounting for 50 percent of exports. Heavy economic dependence renders Taiwan attentive and sensitive to trade issues involving the two.

“It is hard to tell the impact of the trade row at this juncture... It may not alter our ratings actions on China as long as it can maintain a GDP growth of 5 percent,” said Tan Kim-eng (陳錦榮), a Singapore-based S&P credit analyst, told a media briefing in Taipei.

The international ratings agency expects China’s economy to grow 6 percent annually from this year to 2020.

A GDP growth of less than 5 percent is unlikely for China, as domestic demand has become a main growth driver over the years, Tan said.

Healthy domestic demand allows US President Donald Trump to impose extra tariffs on Chinese imports in the first place, because the pinch is not evident, he said.

However, the US economy is expected to slow a bit next year and beyond, meaning there is less room for unfavorable trade policies, or they might backfire and hurt the US administration, S&P said.

The trade spat, even if left unchecked, would not hit China as hard as the 2008-2009 global financial crisis, from which the world’s second-largest economy emerged relatively unharmed, Tan said.

Extra tariffs might slow China’s GDP by 1 percent, with the worst-case scenario at 2 percent, he said.

The matter would grow tougher if the dispute takes a toll on business confidence and investment, S&P said.

The agency said it has not seen a noticeable downturn in sentiment in response to capital flows and pricing levels.

Beijing would take measures to prevent unfavorable scenarios, S&P said.

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