Global investors believe policy space will stabilize Chinese economy during trade war
By Zhang Xinyuan
["china"]
Global investors are not very concerned about the recent China-U.S. trade escalation's impact on the Chinese economy, said Zhang Dewei, chief China economist and head of China Equity Strategy at Deutsche Bank.
When China is challenged by external forces, the Chinese government will loosen its policies to stabilize the economy, Zhang said at a two-day forum themed financial supply-side reform and opening-up this weekend at Tsinghua University.
“The Chinese government has great policy space and political measures up their sleeves. With the policy space, the government can stabilize the economy in the short term,” Zhang said.
Tsinghua PBCSF Global Finance Forum 2019 is held from May 25 to 26 at Tsinghua University, Beijing, China. / Photo by Tsinghua University 

Tsinghua PBCSF Global Finance Forum 2019 is held from May 25 to 26 at Tsinghua University, Beijing, China. / Photo by Tsinghua University 

Debt ratio is stabilizing
Speaking of the policy space in China, the most frequently asked questions are whether China will come back to the development path of flooding the market with stimulation, and the debt ratio will continue to increase.
According to Zhang's observation, global investors, especially mid and long-term investors, are not worried about the debt ratio in China, since after years of climbing, the overall debt ratio stabilized in recent years.
“That's the main reason why global investors are optimistic about China's banking system and macro risks,” Zhang said. “The macro risks are lowering. That's the consensus global investors reached.”
“As the trade tension continues, we expect the policy will continue to loosen up, and it should, but to some extent, there should be a balance,” Zhang said.
He noted that there are two promising signs last year in policy changes that show the Chinese government remains prudent in macro policies. One is that the government reaffirmed real estate are not for speculation, and those responsible for local government debt will be held accountable for life.
Deutsche Bank held a global investors conference last week in Singapore where thousands of global investors attended.
Zhang's team conducted a survey during the conference on the global investors' prediction on trade tension. Ten percent of participants believe that a trade agreement between China and the U.S. would be reached at the coming G20 in Japan, 50 percent believe a trade deal would be reached during the second half of 2019, and 40 percent think there will be no agreement this year.