Once again, the Chinese People’s Congress held its annual meeting. News about China's lower gross-domestic-product (GDP) growth target of 6 to 6.5% has hit the headlines. As we’ve outlined before, we are neither surprised nor overly concerned about this decline in growth rates (see Chart of the Week of 1/25/19 ).
To be sure, China’s wellbeing is of utmost importance to the global economy, due to the sheer size of its economy, as well as its importance for global trade. However, the impact of its slowdown will be nuanced, depending on how much of a deficit or surplus each country runs in goods and services. Keep in mind that China is still running a current-account surplus. However, this surplus is shrinking, and, if dynamics don’t change, might actually turn into a deficit in the not too distant future.
In our "Chart of the Week", we take a look at bilateral trade balances in goods with China. China is often the subject of unfair trade practices. A look at trade statistics reveals a somewhat more nuanced picture. On the one hand, China is recording sizeable trade deficits with quite a few countries, most notable vis-à-vis some countries in Eastern Asia, commodity exporters, but also with Germany and Japan. On the other hand, China keeps running a substantial surplus with many industrialized countries, most notably with the United States. For 2018 it reached a record high of 419.2 billion dollars. Surely not the kind of news the U.S. president is likely to cheer about, given the fact that the United States has hit a total record deficit in trade of 891.3 billion dollars in the middle of his term of office – 2018.
Sources: Bloomberg Finance L.P., DWS Investment GmbH as of 3/5/19