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China can manage decline in exports YARN FIBER
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China can manage decline in exports YARN FIBER

Views:0     Author:Site Editor     Publish Time: 2019-05-31      Origin:Site

It is instructive to recall what happened during the 2008-09 global financial crisis. Chinese exports of goods to the world and to the US declined by 16.0 percent and 12.5 percent in 2009, with a total reduction of Chinese exports of $230 billion (in 2009 prices), about the same real magnitude as half of China's total exports of goods to the US in 2018. Yet China's real GDP still managed to grow 9.4 percent in 2009. This shows that a decline in Chinese exports of this magnitude is quite manageable.

Hence, the trade dispute is unlikely to derail China's economic growth.

Over the past decade, China has become increasingly less dependent on exports as a driver of growth. But a reduction in net exports caused by the trade dispute implies a reduction in aggregate demand and employment, which have to be made up.

Still, the uncertainty caused by the lack of an agreement weighs heavily on the investment and consumption decisions of Chinese enterprises and households. China cannot and should not sit and wait for a trade agreement. The time for the launch of economic stimulus measures is now, even if the trade talks continue. A timely announcement of an increase in domestic demand will reduce uncertainty, revive public confidence and turn the expectations about the future from negative to positive.

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