China Econ Talk: Disagreement on details a risk in China-U.S. trade issue
Updated 21:10, 17-Apr-2019
Global Business and Sandy Huang
["china"]
02:44
China has beaten forecast to record a GDP growth of 6.4 percent in the first quarter of 2019. While this may provide a positive relief to the pessimism in the market, analysts still call for caution ahead of the second quarter results. 
"We need to look through Q1 completely and see what happens in Q2, because we bear in mind that the tech-cycle is still on a weak spot, tariffs are still in place," Vishnu Varathan, the head of Economics and Strategy at Japan-based Mizuho Bank, told CGTN. 
"But I think the bigger picture is China probably has got enough fiscal pace as well as monetary policy tools to ensure that it gets the soft landing it needs," added Varathan, who had predicted earlier that China's Q1 growth would be a little more upbeat than the IMF's anticipated figure of 6.2-6.3 percent. 
Varathan also praised the structural changes China has implemented in recent years, which meant "Beijing will give a lot more support to the new economy, with all the focus on AI, robotics, electric vehicles etc," providing "a very smart buffer and stimulus for the economy." 
The economist lauded China for executing its stimulus policies to encourage consumption efficiently. "The government is creating stimulus where it matters the most and also it's done in tandem with many other policies. So, you've got an easing of credit, particularly to the smaller and medium-sized enterprises (SMEs), which translates into wage support, labor market support." 
Varathan expects China's Central Bank to adopt a more moderate stimulus in 2019. "We think that there will be some easing on liquidity again very targeted 'Triple-R' (reserve requirement ration) cuts, that's contingent on SMEs being given more loans." 
"And there'll also be more financing for banks to get from the PBOC (People's Bank of China) to make sure that the liquidity situation does not disrupt, activity on shore," he added. 
Talking about the China-U.S. trade issue, Varathan felt that questions still remain over the details of the negotiations. 
"Insofar that we are not going to see escalating retaliatory tariffs but I think on very core strategic issues, for example, 5G and beyond, AI and things like that; if the deal required dictating how China should run its industrial and strategic policy, that's going to be a non-starter," he opined. 
"The disagreement over the details will, however, remain a risk as we go forward," Varathan concluded.