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China may be willing to accept an economic downturn to hurt Trump and win a better trade deal
Adaugat pe 08/08/2019 10:31:58 de freemexy
China may go further than many expect to win the trade war and in the
process increase the odds President Donald Trump is a one-term
president, according to global investors.To get more chinese news site, you can visit shine news official website.

From suspending U.S. agricultural product purchases to weaponizing the
yuan, these high-stakes measures, which could put Chinese businesses at
risk, are a preview of how far China could be willing to go economically
to get a long-term deal in its favor.

“Many investors have expressed the view that China is prepared to accept
an economic downturn (and thus a global economic downturn) to prevent
President Trump’s reelection,” Naka Matsuzawa, Nomura’s chief rates
strategist in Tokyo, said in a note Wednesday following meetings with
Asian clients.To retaliate against Trump’s surprise tariffs threat last
week, China struck back swiftly by halting purchases of U.S.
agricultural products, which particularly hurts farmers in the Midwest —
states that are crucial for Trump’s presidential win in 2020.

”[China] could also further curb purchases of agricultural goods,
possibly as a means of undermining Trump’s support base among rural
voters ahead of the November 2020 presidential election,” Mark Haefele,
UBS’ global chief investment officer, said in a note Tuesday.In its
latest move to weaponize the yuan, China is taking a big risk as the
devaluation would lead to an exodus of capital, but it’s also a sore
spot for Trump as he has repeatedly protested the strong dollar.

“China might be tempted to wait for a change of leadership in
Washington,” David Bianco, DWS Group’s chief investment officer, said in
a note Tuesday. “If necessary, China might react with targeted measures
designed to endanger Trump’s re-election, even at the risk of
collateral damage to the global economy and financial markets.”

Trump knows it all too well that this is China’s intention. He warned
recently that China could get a much tougher deal if and when he gets
reelected.China’s strategy could backfire, however. Since hard-line
measures against China can win support from both parties, the next
president could take a similar stance, Matsuzawa said.

Additionally, the further deterioration in China’s growth could be
dangerous by destabilizing the country, which is already dealing with
growing protests in Hong Kong. China’s second-quarter GDP growth was the
slowest year-on-year increase for a quarter in at least 27 years..

“A downward shift in China’s potential growth rate means that the debt
deflation problem could come out into the open,” Matsuzawa said.

Normally a further slowdown would cause the government to unleash a
large stimulus to get the economy growing again, but there’s a chance it
could not act as aggressively as it has in the past.

The Chinese central bank on Monday denied rumors it decided to cut the
benchmark interest rate of RMB loans and deposits of financial
institutions. In a post on Chinese messaging app WeChat, the People’s
Bank of China said the news is untrue and it has reported the situation
to the police for investigation. The denial may have had a hand in
causing global equities to drop further Wednesday.

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