The trade war’s end would bring huge dividends to China, the US and the global economy at large

China’s economy could return to 7 per cent growth, the US could near 4 per cent and the world economy could go back to 5 per cent. But this would depend not just on the trade war ending, but appropriate stimulus and reform measures afterwards

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Chinese Vice-Premier Liu He shakes hands with US President Donald Trump in the White House in Washington on October 11. Photo: EPA-EFE

Published: 1:00am, 29 Oct 2019Updated: 1:18am, 29 Oct 2019

Are the glory days over for China’s stellar growth performance? Certainly, prospects have taken a hard knock with the US-China trade war and the resulting slowdown in the global economy, which have left China’s growth rate slipping to 6 per cent in the third quarter, its lowest level since 1992.

It’s not all bad news, though, as there are grounds to believe China may be close to the bottom of the cycle. Much depends, though, on events leading up to the US presidential election next year and how effectively Beijing gears itself up for stronger reflation in the coming months.

There is no hard evidence the world economy is about to crash into a deeper slump or another financial crisis. In fact, there are good grounds for optimism, with global policymakers showing more willingness to counter the slowdown.

An end to the trade war may be in sight and global reflation efforts in Washington, Beijing and Europe could begin to gain traction again. In the best-case scenario, global growth could easily bounce back, providing a new lease of life for world financial markets, but it’s highly dependent on positive politics playing out.

In the bigger picture, so much depends on President Donald Trump’s tactics in the run up to the US election in November next year. Trump knows full well he’s lagging behind in his public approval ratings and needs to score a major political success to boost his re-election chances.

No doubt his strategists will be looking for the best opportunity for Trump to mend fences with China and win plaudits for ending the trade war and putting more zest back into global recovery. Anything which boosts US growth and creates more jobs, especially in the Trump heartlands, will be fair game.

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