Trump might impact Chinese economy, but not necessarilybadly: analysts

November 10, 2016 / People’s Daily

Analysts cautioned that Trump’s win might be a precursor for turbulence in China-USeconomic and trade relations and create some headwinds for the Chinese economy, givenhis tough stance on trade with China on the campaign trail.

Others argued that the overall direction for one of the largest and most consequentialbilateral trade relationships will remain unchanged, and a Trump presidency might not beas negative as many have suggested, noting that the rhetoric might help ease the pressureon yuan depreciation and capital outflows and help with ongoing efforts to upgradeChina’s industrial sectors.

As votes were being counted in the US on Wednesday, Chinese stocks went through upsand downs during the day, seeing the largest drop of 1.6 percent at one point. But themarket later regained ground and closed only slightly lower than the previous day. TheShanghai Composite Index dropped 0.62 percent, while the smaller Shenzhen CompositeIndex was down 0.61 percent.

By contrast, in the US, stock market futures trading were suspended after plunging thedaily limit of 5 percent. Japan’s Nikkei was down about 5 percent, and Australia’sS&P/ASX200 closed 1.9 percent.

Trump’s win also sent waves in the foreign exchange and commodities markets, with theUS dollar falling 3.6 percent against the Japanese yen and climbing 11 percent against theMexican peso. But spot trading of the yuan was up a slight 0.18 percent against the dollar.

“The Chinese markets remained calm because they are relatively independent and dependmostly on the performance of the domestic economy,” said Xu Gao, chief economist atChina Everbright Securities Co.

But a Trump win could pose some unprecedented challenges to China, especially in tradenegotiations, Chen Lijian, an assistant professor at the University of Dayton in Ohio, wrotein a note to the Global Times.

“China will face unprecedented challenges in terms of economic and trade ties [with theUS],” Chen wrote.

Trump believes that China heavily depends on the US market, pricing for globalcommodities is in the hands of the US and Europe economies, and Chinese food and goodsand materials supplies are also dependent on the US, Xu said. “Trump is very slippery, hewill take all measures to capitalize on such advantages,” said Xu.

Trade deals with the US would be tough to move forward, and the ongoing talks on aChina-US Bilateral Investment Treaty would face tough obstacles, analysts said.

“But in the long-run, the China-US trade ties won’t see substantial changes because ofpotential consequences on both economies,” said Liu Xuezhi, a senior analyst at Bank ofCommunications. Read more…

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