Donald Trump’s former National Economic Council Director Gary Cohn has bolstered the bull case for investment in China by last week admitting that the US trade wars with China were not having a significant impact on the Chinese economy.
Speaking on the BBC Today programme this morning, Cohn the former president of Goldman Sachs who served as director of the National economic Council until April 2018 and who resigned as the President began to implement tariffs on imported goods, claimed that the Chinese economy was going to slow down regardless of a trade war.
Cohn’s comments echo those of Hong Kong asset managers Value Partners whose recent report with Oxford Metrica argued that the economic impact of the continued stalemate was “unlikely to be significant for the Chinese economy”
Value Partner’s report said that the Chinese economy of today was vastly different to what it was 20 years ago and was no longer dependent on exports as a source of growth. The report pointed out that exports accounted for only 18% of China’s GDP in 2018 compared with 34% some 10 years earlier.
For his part, Cohn said today the Chinese economy was driven by credit and credit availability and that availability was determined by central government you could “turn it on and they can turn credit off”.
He said that the trade war was a “convenient excuse” for the Chinese government, to slow down its rapidly overheating economy where real estate prices and everything were getting out of hand and President Trump provided that excuse for the Chinese Government.
“I think the Chinese economy was going to slow down with or without a trade war”, Mr Cohn said.
Value Partners head of London office Hendrick von Ripperda-Cosyn said, “Cohn’s views expressed this morning mirror exactly what Value Partners has been arguing for some time – that the significance of the trade wars has been overblown by a number of observers. Yes, we do believe that the trade war will have an impact on China, but not to the extent that it’s going to knock the Chinese economy of course. In fact, if one listens to Cohn’s full interview, it’s clear that the United States is as badly affected as China.”
It seems financial services – and their increasingly close association with social media platforms – in China at least are showing no signs of slowing. China boasts 800 million internet users (roughly half the population) with social media platforms proving particularly dominant (WeChat recorded 1.08 billion users for Q3 2018). It’s no surprise then that China’s approach to bringing stability and predictability to markets involves data, lots and lots of data…
Chinese developers are busy ferreting through the social media posts of the country’s 147 million retail investors in order to predict buying and selling habits. The process is supplemented by AI analysis and fuelled by vast caches of data purchased from the likes of Tencent Holdings.