China-US Focus contributor Yo Yongding argues that the decline in fixed-asset investment in China is positive and has led to the steadying of China's economy, however, he is concerned that exports will not balance out declining investment. "U.S. President Donald Trump continues to lean toward protectionism in his dealings with China. And while China probably will continue to use fiscal policy to shore up demand, the extent to which it can do so will be constrained by factors like local governments' debt burden and a consequent clampdown on so-called local-government financing vehicles."
Currently, China still has a surplus in goods and a deficit in services. Exports surged in 2017 due to booming overall global trade. However, as the government cuts tariffs on imported goods and slows the rate of exports, the trade structure will change in the next 5 to 10 years, resulting in a potential trade deficit.
Moreover, economists believe that China's economy is stabilizing after decades of rapid growth. As Yongding explains, many believe China "has at last entered a period of stable annual growth of about 6.5 percent – a level that is in line with potential.
Structural change for China's economy, should it occur, would place a strain on the China-U.S. economic relationship. In 2017, China's trade surplus with the United States widened, delivering a blow to President Trump's "America First" ideology. China's trade surplus with the United States soared 13 percent year on year to 1.87 trillion yuan (about 288 billion U.S. dollars), according to Huang Songping, spokesperson of the General Administration of Customs.
As Trump continues to look for ways to take a tougher stance on China, the results of several significant trade investigations are almost due. On Thursday, the U.S. Commerce Department sent President Trump results of its probe into whether steel imports threaten U.S. national security, the results of which have not yet been publicly released. The probe has the potential to lead to broad tariffs or import quotas on products from China. While the China-U.S. trade environment is currently a point of contention between the two countries, a long term decrease in exports from China could be welcomed by those who share President Trump's vision of reducing the bilateral trade deficit.
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