Has China’s economy hit a roadblock? Not necessarily, even though there is an official acknowledgement of its slowing growth rate. China’s growth rate slowed down to 6.4 percent in the December quarter, which is fractionally less than 6.6 percent for the full year, 2018. By no means it is disastrous, except that it is said to be the slowest economic growth rate in quite some years. And this is worrisome for two reasons. First: any slow down is likely to create problems for a country of China’s size where growth momentum is necessary to create additional employment for social stability and political legitimacy. Ning Jizhe, head of National Bureau of Statistics, reportedly said that, among other things, the bigger challenge was finding jobs for millions of unemployed working age Chinese. Second: China’s recourse to economic stimulus by way of injecting more money into the system has its limits and could be counter-productive. Indeed, China was trying to deleverage the financial risk from huge debts racked up by local governments and instrumentalities. Any large-scale stimulus-and it has to be large to make any discernible impact-will make the debt problem even worse. The scale of the debt problem (mostly internal) is gauzed from the fact that China’s total debt is now estimated around 300 percent of its Gross Domestic Product (GDP), which should be ringing alarm bells. So much money is circulating in the system that it is bound to create severe distortions, sooner or later. One area where economic stimulus is creating distortions is the property sector where there is a glut of new apartments waiting to be sold. More than one in five apartments in Chinese cities-roughly 65 million-sit unoccupied, as estimated by Gan Li, a professor at Southwestern University of Finance and Economics in Chengdu. Professor Gan reportedly said, ” We are already in a difficult economic situation. The decline will only get worse.” The US would like China to sign up to stringent standards on intellectual property, foreign investment and state subsidies. And that is going to be a tough call The slump in the property market has undercut the property values of earlier buyers, who have reportedly taken to the streets to protest in some places. The trade war between China and the United States is an important factor creating problems for China’s economy. It has consequences for the US too, for instance, from China’s reduced imports of agricultural products, like soybeans, thus affecting Trump’s constituency. The recent official level talks in Beijing between the two countries seem to have gone nowhere. And unless there is a breakthrough in the trade impasse before March 1, the US is committed to impose further tariffs on imports from China, with Beijing likely to retaliate. The Chinese government appears willing to substantially increase its imports from the US to rectify the trade imbalance between the two countries, where China has been running a large trade surplus. The US believes that there are structural problems on the Chinese side and unless these are fixed, the trade relationship will always be skewed to their disadvantage. The US would like China to sign up to stringent standards on intellectual property, foreign investment and state subsidies. And that is going to be a tough call. Indeed, it is becoming part of a larger strategic contest with China. The US believes, that China is calculatedly seeking to supplant the US as the top global player and Washington is determined to maintain its supremacy. It is seen, among other things, in China’ technology leap, with push back from Five Eyes countries (US, UK, Canada, Australia and New Zealand) against the Chinese technology giant, Huawei, seeking to penetrate the new generation mobile sector. The arrest in Canada of the Huawei executive, Meng Wanzhou, the daughter of its founder, on a US extradition request for the company’s alleged violation of sanctions on Iran, and the subsequent arrest in China of two Canadian citizens on spy charges, seems part of the larger strategic contest between the two countries. However, the ongoing trade war between China and the US, unless resolved, has serious implications for global economy. And it surely is affecting China. Ning Jizhe, head of China’s National Bureau of Statistics has acknowledged that, ” The China-US trade war is affecting our economy, that is true, but its implication is manageable.” And considering its adverse impact on global economy, it is high time that a resolution is arrived at, sooner rather than later. The writer is a senior journalist and academic based in Sydney, Australia Published in Daily Times, February 2nd 2019.