Tax cuts could support China's economic growth, even if the trade war doesn't ease, according to the chief economist of a Chinese investment banking firm.
"That has supported domestic demand, particularly consumer demand," Liang said, pointing to retail sales, which surprised the market with aThe effects of the tax cuts are still feeding through the system and will add to confidence, she projected, which will be enough to offset the slowdown caused by U.S. tariffs on Chinese goods.
Most Chinese estimates put the impact of the trade war at 0.5% to a "maximum 1% of GDP," she said. "But if we look at the tax cuts, that's more than 1% of GDP. So if we just do a net net, that seems to be enough." The risk now for China, Liang added, is that the U.S. launches new tariffs on Chinese goods, or that weakness is inadvertently introduced as regulators work to improve the financial system.
She said: "But if we just talk about the tariff and the negative impact of that on trade, we think the tax cut is enough."
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