IMF cuts China’s 2019 growth forecast as trade tension escalates

The US government listed $300 billion more of Chinese goods for possible tariff hikes after earlier imposing punitive duties on $200 billion of imports from China. (AFP)
Updated 05 June 2019
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IMF cuts China’s 2019 growth forecast as trade tension escalates

  • The downgrade came just two months after the IMF raised its China growth forecast to 6.3 percent from 6.2 percent

BEIJING: The International Monetary Fund (IMF) on Wednesday cut its 2019 economic growth forecast for China to 6.2 percent on heightened uncertainty around trade frictions, saying that more monetary policy easing would be warranted if the Sino-US trade war escalates.

The downgrade came just two months after the IMF raised its China growth forecast to 6.3 percent from 6.2 percent, partly on then-brightening prospects for a trade deal with the United States.

A sudden escalation in the Sino-US trade tensions last month underlined the risks for the world’s second-biggest economy from higher US tariffs on billions of dollars of Chinese goods.

Washington has levied higher tariffs on a total of $250 billion of Chinese imports since mid-2018, accusing China of forced technology transfers and intellectual property theft. China, which denies the accusations, has retaliated with tariffs on about $110 billion of US goods.

“Growth is expected to moderate to 6.2 percent and 6.0 percent in 2019 and 2020, respectively,” said the IMF’s Deputy Managing Director David Lipton in a statement. “The near-term outlook remains particularly uncertain given the potential for further escalation of trade tensions.”

US President Donald Trump has threatened to slap tariffs of up to 25 percent on an additional list of Chinese imports worth about $300 billion.

The trade war has already upended global supply chains and hurt world growth. Economists say the tariffs will curb growth in the United States and China, and financial markets fret a protracted dispute could tip the world economy into a recession.

China’s central bank has cut the amount of cash that commercial lenders need to set aside as reserves six times since the start of 2018 to spur lending and prop-up its slowing economy. Beijing is also rolling out tax cuts to support businesses, especially manufacturers hurt by the intensifying trade war.

“The policy stimulus announced so far is sufficient to stabilize growth in 2019/20 despite the recent US tariff hike,” Lipton said, following recent meetings with officials in China.

“No additional policy easing is needed, provided there are no further increases in tariffs or a significant slowdown in growth.”


UK core pay growth strongest in nearly 11 years, but jobs growth slows

Data showed the unemployment rate remained at 3.8 percent as expected. (Shutterstock)
Updated 16 July 2019
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UK core pay growth strongest in nearly 11 years, but jobs growth slows

  • Core earnings have increased by 3.6 percent annually, beating the median forecast of 3.5 percent
  • The unemployment rate fell by 51,000 to just under 1.3 million

LONDON: British wages, excluding bonuses, rose at their fastest pace in more than a decade in the three months to May, official data showed, but there were some signs that the labor market might be weakening. Core earnings rose by an annual 3.6 percent, beating the median forecast of 3.5 percent in a Reuters poll of economists. Including bonuses, pay growth also picked up to 3.4 percent from 3.2 percent, stronger than the 3.1 percent forecast in the poll. Britain’s labor market has been a silver lining for the economy since the Brexit vote in June 2016, something many economists attribute to employers preferring to hire workers that they can later lay off over making longer-term commitments to investment. The pick-up in pay has been noted by the Bank of England which says it might need to raise interest rates in response, assuming Britain can avoid a no-deal Brexit. Tuesday’s data showed the unemployment rate remained at 3.8 percent as expected, its joint-lowest since the three months to January 1975. The number of people out of work fell by 51,000 to just under 1.3 million. But the growth in employment slowed to 28,000, the weakest increase since the three months to August last year and vacancies fell to their lowest level in more than a year. Some recent surveys of companies have suggested employers are turning more cautious about hiring as Britain approaches its new Brexit deadline of Oct. 31. Both the contenders to be prime minister say they would leave the EU without a transition deal if necessary. A survey published last week showed that companies were more worried about Brexit than at any time since the decision to leave the European Union and they planned to reduce investment and hiring. “The labor market continues to be strong,” ONS statistician Matt Hughes said. “Regular pay is growing at its fastest rate for nearly 11 years in cash terms and its quickest for over three years after taking account of inflation.” The BoE said in May it expected wage growth of 3 percent at the end of this year.