As per usual, these downward trends are coupled with doubts about China’s real growth rate. This suspicion is both recurring and irrelevant. Not only are many statistics skewed, especially at a local level, but much of China’s GDP is in any case a result of constant stimulus fostered by all levels of government: augmented net government borrowing has been nearing 11% per year since 2016. Indeed, what matters most is the leeway the central government has to support the economy – especially if the latter does indeed go from drifting to tanking. China has key assets and advantages that it can mobilize: foreign currency reserves (with a small rebound since 2017 due to the fight against hot money outflow), a still slightly positive current account balance, huge household savings that are still largely captured by a state financial system practicing financial repression at the expense of savers, and a central government budget policy, which is under control (unlike local finances). These should be sufficient to dispel the recurring doomsday predictions of a crash.
Yet if these resources can be used in the short term to prop up the economy in front of a trade war, how would it play out in the long term for the Chinese economy? Would it result in more unsustainable projects, more financial and real estate speculation, more state-owned enterprises? The Chinese government is probably aware of this risk, as it has so far released only limited stimuli to the economy - essentially bonds, and more targeted credit for private companies.