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Window of opportunity to Chinese investment
China is the especial target of US ire, with the US pursuing aggressive economic policies against China.
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US President Donald Trump stands up after signing trade sanctions against China on March 22, 2018 in the Roosevelt Room of the White House on March 22, 2018. Trump will impose tariffs on about $50 billion in Chinese goods imports to retaliate against the alleged theft of American intellectual property, White House officials said Thursday. (AFP/Mandel Ngan)
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arlier this month, Indonesia successfully hosted the International Monetary Fund-World Bank Group Annual Meetings against the backdrop of worsening global economic woes, thanks to United States President Donald Trump’s decision to play hardball against its trade partners. China is the especial target of US ire, with the US pursuing aggressive economic policies against China.
Trump’s aggressive stance toward China has occurred at an inopportune moment for the Asian giant, as it tries to tackle its overcapacity problem. Over the past few years, China has produced too much steel, cement, coal, plate glass and other materials as a result of cheap credit and local governments’ offering economic incentives to attract factories to their regions.
As the Chinese economy has slowed, demand for these products has fallen, saddling factories with a stockpile of goods that produce no income — and no return on their investment. In order to fight the trade war and tackle its overcapacity problem, China has been forced to pump more cash into its economy to stimulate growth, which is essentially a reversal of its credit tightening policy.
The Chinese economy’s overcapacity problem thus means that there are few places in that country where that money will get good returns, since all the low-hanging fruits have been picked. While it is likely that China will withstand this economic warfare — at least in the short term — because of the size of its economy, it is likely that the trade war will have long-term impacts.
