MNI POLICY: U.S. Hiking Tariffs Will Hurt China's GDP By 0.3pp

     BEIJING (MNI) - Escalating trade conflicts between China and the U.S. will

have only a small impact on the Chinese economy because the real economy and

capital markets have become more resilient to external shocks, according to a

report in the Financial News. The newspaper, which is operated by the People's

Bank of China, says that a combination of hiking US tariffs on $200 billion of

Chinese exports from 10% to 25% and Chinese counter measures would dampen

China's GDP by about 0.3 percentage points. Citing Ma Jun, a member of the

central bank's Monetary Policy Committee, Financial News says that the negative

impact of the tariff hikes is controllable. Ma said the Chinese economy had

improved significantly in recent months and he pointed to improved PMI data, a

series of supporting policies to ease the financing difficulties of private

enterprises and tax cuts larger than those in the U.S. The recent introduction

of more proactive fiscal policies and the improved monetary conditions would

kick in and have an impact on the economy in the coming quarters. Ma said he

believed this would strengthen the resilience of the capital markets in the face

of any new external headwinds. The stock market slumped last year because

investors could not judge the real impact of the trade friction, Ma said, adding

that market sentiment was also soured by the economic slowdown and the excessive

contraction of shadow banking. On Friday, China's Ministry of Commerce confirmed

that China would take countermeasures in response to the U.S. tariff hikes on

$200 billion of Chinese exports. 

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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