China’s economy would grow by 7.5 per cent this year, were it not for the trade war, ING says

China’s economy would have grown by 7.5 per cent this year – against a current projection of 6.3 per cent – were it not for its trade war with the United States, Dutch investment bank ING said on Wednesday.

Nomura, the Japanese investment bank, meanwhile, said global investors were likely to ignore the dispute and continue investing in China.

Iris Pang, Greater China economist at ING, said according to a baseline view of continued tensions with little resolution, China’s economy will grow 6.3 per cent year on year in the third and fourth quarters. Although an improvement over second-quarter growth, which at 6.2 per cent was the weakest in at least 27 years, “if there were no trade war, no technology war, everything was dialled back”, China would be growing at 7.5 per cent, she said.

In a worst-case scenario, where “Chinese technology companies can no longer buy anything outside China”, growth will slow to a low of 6 per cent. “It will not fall below 6 per cent, because psychologically that is not good for the Chinese economy, companies, spenders,” Pang said.

If economic growth does fall to 6 per cent, Pang said the People’s Bank of China (PBOC), the country’s central bank, could cut the reserve requirement ratio four more times through to the second half of 2019, up from a current baseline of two.

The cuts would help fund investment in research and development, making up for the loss of imports from the US, Pang said.