What Markets Can Expect Next From China

Trade tensions between the U.S. and China have escalated to the point where each side has slapped tariffs on imports. The logical question is: What now? Although I am hopeful a deal between the two countries will be reached by the end of May, I also expect China to announce policies that attempt to mitigate any economic downside resulting from the trade frictions.

Those policies would include measures to boost domestic consumption and investment, as well as an acceleration of broader reforms already underway. The Chinese State Council announced some initial moves last week, reducing value-added tax rates to 16 percent from 17 percent starting May 1 for the manufacturing sector, and cutting them to 10 percent from 11 percent for the transportation, construction and telecommunications services industries. Plus, the government will set up a national financing guarantee fund with an initial investment of 60 billion yuan ($9.52 billion) to support small and micro companies, startups, and agriculture businesses.