The latest escalation in the tit-for-tat trade war has roiled markets. Yesterday’s data on passenger car sales from China were not positive either: sales dropped 8.5% m/m in April. There are plenty of caveats, of course. Last week’s headlines focussed on the poor export numbers from China’s trade release, but the rebound in imports suggests domestic demand is holding up.
China is revamping VAT and lowered the tax burden on individuals and businesses by RMB 341.1bn in Q1. Beijing has pledged nearly RMB 2 trillion of tax and fee cuts in 2019.
For some investors, it will be difficult to look past the trade wars. However, there has been significant news on other fronts that highlights important longer-term structural trends. This will not provide relief for equity markets in the short run perhaps, but may provide clues as to how China’s economy could hold up this year, despite the trade dispute.
The granting of banking licenses to Chinese tech giants underlines their ambitions. It will grant China further economic and political clout too, by appealing to consumers who are dissatisfied with incumbents: customer satisfaction in Hong Kong is among the lowest for a developed economy. Singapore may look to follow suit by offering digital banking licenses of its own.
In short, the success of China’s technology companies on a global scale underlines how far the transition has come. The domestic proliferation of fintech has spurred a host of other service sector industries. The latest figures from the China Ministry of Human Resources and Social Security show that as of 2018, the service sector employed approximately 125 million more people than industry. The gap is widening too.
