A closer look at the US-China trade war

IT SEEMS that the US is winning in its trade war. Since tensions started boiling over into real actions this year, the Shanghai Shenzhen CSI 300 Index - made up of 300 A shares in China - has plummeted by 15.27 per cent from the start of this year till end-July in Singapore dollar terms. Factoring in dividends, the decline is slightly less at 13.71 per cent. Meanwhile, the S&P 500 has continued to power ahead. In the first seven months of this year, it advanced 7.24 per cent or 8.39 per cent with dividends reinvested in Singapore dollar terms. That is a difference of some 22 percentage points.

There is no denying the importance of the US in global economy and global trade. The US economy makes up about 24 per cent of global gross domestic product (GDP). In comparison, as the second largest economy in the world, China now accounts for 15.2 per cent of the world GDP or 63 per cent of US GDP.

As with many Asian economies, China depended on exports to grow its economy. But exports as a share of China's GDP has been declining since 2006. From a peak of 36 per cent of its GDP in 2006, exports accounted for just under 20 per cent of China's GDP in 2017.