The trade war has not started yet, but Beijing is already suffering first losses. The Chinese shares and stock indices are falling. The Shanghai Composite has lost over 20 percent since January. The shares are dropping in price as the weak yuan increases the value of companies’ debt in the US dollars.
Investors completely thrust aside measures of market sentiment support adopted by the government - even such a serious step as loosening reserve requirements for several banks. Market participants pay all their attention to the United States, and most of them believe that China will not weather a large-scale trade war. “Pessimism will keep growing as many companies are on the edge of margin calls and bond defaults. Shanghai Composite could fall at least another 10 percent,” Sun Jianbo, China Vision Capital president in Beijing, said. War is a very expensive event, only few can afford it: those with funds and those who have nothing to lose. China is neither. The nation’s stock market has already lost 1.8 trillion dollars since January and this is not the end.
Besides, Americans are skillful strategists. In China, a new 5-year plan has started, ahead of which basic principles of the development scheme were introduced. This plan reflects striving of Xi Jinping to create a great power. The trade conflict with the United States will surely prevent Jinping from keeping his promises. In such a case, any countermeasures of Beijing threaten to slow down the economic growth in the country, while a true confrontation will cause recession.
