Major Free-Trade Agreement Could Bring Negative Downturn To Chinese Economy

A free-trade agreement that is being led by the United States is expected to have a negative impact on China’s economy, as the Chinese Gross Domestic Product (GDP) could fall by an estimated 2.2%.

The chief research economist from the People’s Bank of China Ma Jun made the prediction, which was published in an official Chinese state news release.

The pending trade agreement is called the Trans-Pacific Partnership (TPP), and China is not included in the agreement. The agreement would cover nearly 40% of the global economy. It would bring together some of the top trading countries in the world, including the United States, Japan, Australia and Vietnam. It is still pending, requiring further discussion and approval by the 12 member countries.

Mainland China and Hong Kong are expected to be the two biggest losers of the impending deal, and some economists believe that it could threaten China’s position as “the world’s factory”.

Many experts believe that the trade deal is a strategy by the United States to counter China’s economic influence which is felt across the world. China has experienced an economic slowdown this year, and some believe that this upcoming deal will further restrict Chinese economic growth, in what could be a major blow to Chinese exports.

However, some economists are saying that Ma’s prediction of a 2.2% decline in GDP is overstated. Other economists are only predicting a 0.14% to 0.5% decline in China’s GDP.

The Chinese economy is expected to grow by only 7% this year. Last year, it grew by 7.4%, which was the slowest growth rate for the country since 1990.

The TPP would cover trading issues regarding investments, environment, labor and the establishment of intellectual property by state enterprises.

However, China and Hong Kong are remaining optimistic about the situation.

Honorary chairman of the Federation of Hong Kong Industries Lau Chin-ho said, “The trade deal is unfavorable to Hong Kong, but it’s not the end of the world.”

Lau went on to state that the agreement would lead to the Chinese government taking action to improve the operating environment and competitiveness of the industries of mainland China. The industries in China have been hurt by rising wages, increasing labor policies and industrial reform.

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