US Commerce Secretary Gina Raimondo completed a four-day trip to China, meeting the likes of Premier Li Qiang, Vice-Premier He Lifeng, her Chinese counterpart Wang Wentao, and tourism minister Hu Heping.
Li said that only through dialogue could both sides “learn about each other’s concerns and find a middle ground”.
Following the meeting with Wang, Washington and Beijing took a step toward managing bilateral tensions by setting up a joint economic working group for the first time in nearly three years of Joe Biden’s presidency.
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US-China relations depend on strong economic ties, says US commerce chief during talks in Beijing
US-China relations depend on strong economic ties, says US commerce chief during talks in Beijing
2. Trade woes
The joint economic working group will cover commercial, trade and investment, and comes after China’s shipments to the United States in July dropped for the 12th consecutive month by falling 23.12 per cent, data released in mid-August showed.
It was part of an overall easing of China’s trade in July as exports contracted by the most since the start of the pandemic after falling at the fastest pace since February 2020.
Exports, meanwhile, fell by 14.5 per cent last month from a year earlier to US$281.76 billion, compared with a fall of 12.4 per cent in June.
3. Youth-unemployment data halted
More than one out of every five people aged 16-24 in China has been unemployed since April, and the rate rose for the year’s first six months before authorities decided the statistics needed to be “further improved and optimised” and opted not to release the July rate.
This ignited concerns over data transparency and economic ramifications – as such key figures are vital for economists and investors to accurately gauge the state of China’s economic slowdown.
“A decision to discontinue the youth-unemployment figures just after they hit a record high doesn’t inspire confidence,” said analysts at Capital Economics.
4. Food pushes down inflation
China’s consumer price index (CPI) fell by 0.3 per cent in July, year on year, with a sharp drop in food inflation being the main culprit, according to analysts.
The producer price index (PPI), meanwhile, fell by 4.4 per cent in July, marking the 10th consecutive month of contraction due to volatile commodity prices.
But despite CPI joining PPI in deflationary territory in July, analysts said the worst may actually be over for China, with doubts that both will still be in deflationary territory by the end of the year.
Analysts have drawn parallels with China’s ongoing economic slowdown with Japan’s growth slowing significantly after its asset-price bubble burst at the end of 1989, with low inflation and interest rates largely driven by an ageing population.
5. China responds to Fukushima water release
Towards the end of August, China banned all Japanese aquatic products in response to the release of wastewater from the Fukushima nuclear plant destroyed by a tsunami 12 years ago.
Beijing’s decision, analysts said, could backfire and have an impact on China’s own seafood sector.
However, China’s banning of seafood imports is not seen as a deeply impactful measure against Japan.
6. Property investment falls, mortgage rate held
Property investment in China fell by 8.5 per cent, year on year, from January to July, after dropping by 7.9 per cent in the first half of the year, marking the lowest growth rate this year.
The People’s Bank of China lowered the rate of the one-year medium-term lending facility from 2.65 to 2.5 per cent, representing the largest cut since April 2020, but refrained from slashing its widely watched mortgage rate.
The unexpected move raised market concerns over how the world’s second-largest economy will tackle the ongoing property crisis and also restore homebuyer confidence.
Meanwhile, problems at China Evergrande Group and fellow property developer Country Garden have left global investors, Chinese homebuyers and economists holding their breath to see which domino will be the next to fall, and what Beijing can do to prevent its own so-called Lehman moment.
7. Typhoons, floods test food-security push
China said it will expand a trial of genetically modified corn and soybeans to 20 counties across five provinces, with food security increasingly becoming a top priority for Beijing.
Its importance was underlined in August as floods hit China’s top grain-producing region, intensifying Beijing’s push for self-sufficiency amid rising tensions with the US and global market disruptions stemming from the Russia-Ukraine conflict.
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