China's latest quarterly economic data shows that while controlling debt levels, the Chinese government is in a dilemma in stimulating economic growth. The dual challenges of economic slowdown and escalation of trade wars are threatening shipping prospects.
Analysts worry that China's exports will face pressure due to continued trade disputes between China and the United States, and China's economy will further weaken this year.
The second-quarter results announced by the world's second-largest economy exacerbated this concern after the US threatened to impose tariffs on another $200 billion imported product from China.
From April to June this year, China's GDP growth rate fell to 6.7%, the lowest level since 2016. Analysts generally predict that the growth rate in the second half will be further slowed down.
Li Chao, chief macro analyst of China Huatai Securities, expects the economic growth rate to fall to 6.5% in the fourth quarter.
Affinity said China may not be able to achieve its full-year target of 6.5%.
The slowdown in infrastructure and manufacturing investment is considered to be the main reason for the economic slowdown in the second quarter. Behind this is the Chinese government's policy of tightening credit control. As China's debt problem remains serious, this policy seems difficult to reverse.
Affinity said in a report, "The Chinese government is currently finding itself in a conflicting policy dilemma: is it a tight monetary policy to force financial deleveraging, or a loose monetary environment to maintain a strong economy? increase."
This may explain why Xu Zhong, the director of the Research Bureau of the People's Bank of China, last week called on the Ministry of Finance to introduce a "more active fiscal policy" to stimulate the economy.
But the Treasury also has its own troubles. With a series of tax cuts that have been or will be introduced this year, fiscal spending has grown at a faster rate, while provincial governments are still heavily indebted.
In addition, if the Sino-US trade war escalates, it will further reduce government revenue.
Now, if the Chinese economy is unable to resume its growth momentum, in the long run, China's demand for imports of bulk commodities and raw materials such as iron ore and crude oil will fall.
Of course, the more pressing threat is the trade war with the United States.
Washington and Beijing decided to impose a 25% tariff on goods imported from each other worth $50 billion.
JPMorgan estimates that if China imposes a 10% tariff on US$200 billion of Chinese imports in September or October, China’s exports to the US will fall by 8.6%.
The insider earlier predicted that if the United States raises the total amount of Chinese exports that impose a 25% tariff to $450 billion, it will further deteriorate and will make China and the United States The eastbound container traffic of the route is reduced by about 15%-20%.
Container carriers are already struggling with overcapacity and fuel costs, and they won't like the news. Carriers that primarily operate trans-Pacific routes will be more worried.
In addition to the friction between China and the United States, the International Monetary Fund (IMF) warned that by 2020, the US and its trading partners are currently facing tariff threats that could cause global GDP losses of about $430 billion.
If unfortunately, some losses will inevitably be borne by the shipping industry.
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