China: Aiding global slowdown? – Capital Economics

Neil Shearing, group chief economist at Capital Economics, suggests that according to their China Activity Proxy (or CAP) indicator, Chinese growth is slowing but not collapsing.

Key Quotes

“Interestingly, this slowdown has been due to domestic headwinds – including tighter credit conditions – rather than “trade wars”. December’s trade data (released today) were soft, but the data for the preceding months were surprisingly strong and show exports to the US growing at a decent pace, which may reflect producers trying to front run any future escalation in tariffs.”

“The weakening of credit growth over the past six months or so is consistent with economic growth dropping to around 4% by mid-2019. At the same time, a weaker global economy means that Chinese exports are likely to soften even if a trade truce is agreed.”

“While China’s economy isn’t facing an imminent collapse, neither is it in a particularly good place. Growth in 2019 is likely to be weaker than in 2018 and this will play a significant role in the coming global slowdown. We estimate that slower growth in China will shave about 0.2%-pts off world GDP growth this year compared to 2018.”