China ramps up domestic spending to offset Trump's trade war
The Chinese yuan. Photo: VCG via Getty Images
The Chinese government is spending $199 billion on infrastructure to prop up domestic growth as the trade fight with the U.S. rages on, reports the South China Morning Post.
Why it matters: China is prepared to both retaliate and out-wait the U.S. in a trade war, and it has tools — like upping government spending — to blunt the effects of Trump's tariffs.
The big picture:
- China has a narrow government deficit — about 2.6% of GDP — compared to the United States', which is estimated to reach 4.2% of GDP. As a result, the Chinese government can massage policies to promote domestic growth as the trade fight escalates.
- Experts say China may also deliberately devalue the yuan to stave off trade war effects.
- China is also cutting corporate taxes and increasing loans to businesses, CNN Money reports.
The bottom line: We're unlikely to see either side back down in the trade war any time soon.