The Goldman Sachs technology M&A team, led by Sam Britton, has cashed in on its software focus and decades of experience to dominate 2019's biggest deals.Technologyread more
American small and medium-size companies that rely on China are scrambling to adjust their business plans in response to the escalating trade war.Traderead more
Here are the products that stand to be the most affected by China's new tariffs on $75 billion worth of U.S. goods.Marketsread more
The summit comes amid fears over a global economic slowdown, and U.S. tensions over trade allies, Iran and Russia.Politicsread more
The world's second biggest economy is past a point where it cannot ignore its enormous debt anymore, according to an analyst.China Economyread more
Carl Medlock used to work at Tesla. Now he's one of the few people in the U.S. that can fix the company's original Roadster electric vehicles.Technologyread more
Trump does have some powerful tools that would not require approval from U.S. Congress.Politicsread more
Stocks dropped after Donald Trump ordered that U.S. manufacturers find alternatives to their operations in China.US Marketsread more
As demand for lab monkeys continues to rise, U.S. scientists are reporting delays in research projects because they can't obtain enough animals, according to the National...Politicsread more
The European Union will respond in kind if the U.S. imposes tariffs on France over digital tax plan, EU chief Donald Tusk told G-7.Technologyread more
Trump said he will raise tariffs on $250 billion in Chinese goods to 30% and hike duties on another $300 billion in products to 15%.Politicsread more
"Fiscal policy will be the front line of defense against mounting macroeconomic headwinds in 2019," Haibin Zhu, J.P. Morgan's chief China economist, wrote in a recent note.
The challenges in China's economy are already starting to show. On Monday, Beijing reported its slowest GDP growth in decades, with official data showing that the economy grew 6.6 percent in 2018 compared to a year ago — it's slowest rate of expansion since 1990.
That comes amid signs of softening demand — with recent data pointing to weaker exports and a slowdown in manufacturing activity — as the trade war with the U.S. appears to be taking a toll. Analysts such as Zhu say that Beijing will need to turn to fiscal measures, which typically means boosting government spending and cutting taxes, in order to stimulate the economy.
Earlier this month, the Chinese finance ministry said the country will boost fiscal expenditure and implement larger tax and fee cuts in 2019. Those cuts will focus on reducing burdens for small firms and manufacturers, the ministry said.
Already, Chinese authorities have announced cuts in individual income taxes and tariffs, and higher tax rebates for exports, noted J.P. Morgan's Zhu. He said he expects overall tax cuts to be "sizable," reaching 2 trillion yuan, or 2 percent of GDP.
While the Chinese government favored spending on infrastructure as a fiscal stimulus in the past, that led to a sharp rise in local government and state-owned enterprise debt — which Beijing has been trying to keep under control.
So the "the major fiscal effort will be tax cuts this year," Zhu said. "The government has grasped the problem and is adopting a different style of fiscal stimulus: tax cuts, for both households and corporations," he added.
Particularly significant would be a cut in VAT, or value-added tax, that's expected to take place before the annual National People's Congress meeting in March, said Hao Zhou, senior emerging markets economist at Commerzbank. VAT is China's largest tax revenue category.
"That will be very important and significant to the market," said Zhou, who added that VAT accounts for one-third of China's tax revenue.
Some say, however, that tax cuts could be of limited impact to GDP growth, and Bo Zhuang, chief China economist at TS Lombard, said they may even take six to nine months to create results.
Beyond changes to the tax regime, Chinese policy-makers have already been taking steps to ease monetary policy — including reducing the amount of money banks need to set aside as reserves at least five times in the past year — but those measures have been limited. Beijing has been trying to rein in debt, but a system full of cash would be counterproductive as it encourages debt-laden businesses to borrow more.
There's also the risk of capital outflows should the Chinese yuan lose its value in an easing exercise, Zhu added.