How is China going to manage the incoming trade war?
China is much better prepared for the incoming trade war than they were in 2018 when we last had a similar situation. Back then, many in China believed that tariffs wouldn't go as high as 25 per cent and thought they were just a negotiating tactic. However, tariffs did reach 25 per cent, although not all goods were affected.
Chinese corporates are now well-versed in managing tariffs and have adjusted their strategies accordingly. They are better prepared for any potential increases in tariffs. They have increased their market share in other regions like Latin America, the Middle East, and Africa, which helped mitigate the impact of losing market share in the US.
The main challenge for European corporates doing business in China is domestic competition among Chinese companies, which is often fierce. Many foreign companies struggle in this environment.
Which economies in Asia and the world will be impacted by the trade war?
The trade war will impact various economies, not just China. The first trade war in 2018-2019 saw the EU becoming the biggest trading partner of the US, replacing China. This shift indicates that other economies can benefit from the trade war.
China's trade and economic relations with other countries are evolving. While the US and EU are imposing trade barriers, China is focusing on expanding its market share in other regions. This strategy has led to a significant trade surplus for China. Despite the challenges, China remains a formidable player in the global market.
How is China performing domestically given its recent economic struggles?
The Chinese economy has been struggling, particularly due to issues in the property sector. However, there are signs of improvement. The property sector is slowly turning around, which is crucial for the domestic consumer market. Although it takes time to see significant changes, the economy is moving in the right direction.