Bank of America Corp., Morgan Stanley and UBS Group AG say China’s expansion may slow below 6 percent under such a scenario for the first time in almost three decades. The 5.8% pace seen by chief Greater China economist Helen Qiao at Bank of America would create “a more dire growth environment than the number suggests.”
The economy is set for a bumpy ride in the short term, with additional tariffs on $200 billion of Chinese products shaving 0.3 percentage points this year, according to economists “The outlook is bleak,” said Chen Long, an economist at research firm Gavekal Dragonomics in Beijing in a May 14 note. “Equities are likely to correct further, potentially wiping out most of the market’s year-to-date gains. Bond yields will fall again, after the recent pick-up. And the renminbi is likely to soften,” he said, referring to the yuan by its other name.
U.S. tariffs on Chinese products have already set in motion a profound shift in global supply chains that won’t be easily reversed. That threatens to accelerate the departure of manufacturers that already are reeling from rising labor and other costs.Japanese office equipment maker Ricoh Co. said Thursday it is moving some production from China to Thailand to avoid trade war risks and Taiwan’s Kenda Rubber Industrial is investing in Vietnam for the same reason.