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China’s economy fared better in the first quarter of the year than expected, but this reflects a moment before the explosive trade war with America and before the world’s two largest economies were effectively disconnected.
Economists predicted that it would grow about 5.1% in January March compared to a year earlier. Eventually it grew by 5.4%.
But these impressive figures hide the very serious challenges facing China’s economy from Trump’s trade war, and they will hardly be sustained as the year goes on.
Of great importance is that the worst of Trump’s rates came into effect in April and was therefore not reflected in these figures.
In the first quarter of China, an initial rate of 10% on all its exports to America, which was then increased from March 10 to 20%.
But at that level, China planned and prepared for taxes, so the impact was quite minimal.
The growth was also powered by the fact that exporters rushed to deliver bulk orders before the rates came into effect.
In fact, exports in March increased a remarkable 12% compared to a year earlier, a rate that would not be maintained.
Indeed, the current rates on goods sold from China to America stand at 145%. Trading at that price is anything but impossible.
Given exports are responsible for a fifth of the economy of China and given the fact that consumer confidence is still slow, there will be a significant hit.
Experts agree that China is likely to miss its annual growth cool of 5% – the question is how much.
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