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Amid China’s economic slowdown, window is open for investors

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China’s current three-year economic cycle – measured in nominal GDP growth – is coming to an end, and the question is how hard the landing will be.

The latest economic numbers show few comforting signs. With the manufacturing Purchasing Managers’ Index at its weakest since February 2016 and industrial profit growth turning negative for the first time in three years, the Chinese economy is confronting formidable headwinds.

The slowdown in economic activity has also exerted pressure on prices, accelerating a decline in both factory-gate and consumer inflation and causing concern that the Producer Price Index might turn negative in the first quarter of 2019. That would create anguish for the industrial sector, reminiscent of the deflationary period from 2012 to 2015.

Domestic woes aside, dark clouds still loom externally. True, the recent news about the trade talks has been mostly positive, but vice-ministerial meetings concluded without concrete signs that the two sides are reaching a deal.

Beijing’s stance in the trade negotiations is clear. China is willing to buy more US products – soybeans, oil and natural gas – and to open up its market to narrow the chronic trade deficit with the US.

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© South China Morning Post