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ANALYSTS focus on what Joe Biden’s election victory will mean for China’s economy and markets after relations with the United States plummeted under the presidency of Donald Trump.
While most expect the United States to change its approach when dealing with China, they also say that a prolonged rivalry between the world’s two largest economies is here to stay.
“We expect the Biden administration to adopt a more predictable and multilateral China economic and financial strategy,” said Shaun Roache, chief Asia-Pacific economist at S&P Global Ratings. However, “the central economic problems at the center of the tension, especially the access market and industrial policies, are likely to remain intractable.”
Here’s how analysts are reacting:
Dual circulation
As frictions are likely to continue in the medium and long term, China will continue its policy of greater economic self-sufficiency, Zhongtai Securities Ltd. economists Xu Chi and Zhang Wenyu wrote in a WeChat post.
“We believe that we should not make overly optimistic assumptions about US-China relations in the medium and long term after Biden takes office,” they wrote. “It is still necessary to accelerate the formation of a new development pattern with the domestic market as the pillar, and national and international markets support each other, in order to protect against possible external risks and challenges in the development process.”
That was echoed by Bo Zhuang of research firm TS Lombard, who said China will continue to buy time, especially on the technology front.
“The United States and China will increasingly compete directly in multiple spheres ranging from technology to security,” he said. “The leadership in Beijing sees China engaged in a long-term struggle with the United States, which it has to pursue as the core of its claim to power, reducing dependence on the US in favor of the ‘China Model'” .
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The incoming US president is likely to seek a more multilateral trade approach than Trump, meaning there is less scope for another barrage of tariffs at least in the short term, said Chua Hak Bin, senior economist at Maybank Kim Eng Research Pte. In Singapore.
“A Biden administration is expected to pressure China through alliances and further liberalization, rather than through sanctions, tariffs and currency manipulation charges,” he said. “The US-China Trade War May Cool Down Under Biden.”
Yuan
Expectations of a somewhat less confrontational approach by Biden will offer support for the yuan even as broader tensions between the United States and China persist, said Khoon Goh, head of research at Australia & New Zealand Banking Group Ltd. in Singapore. The offshore yuan is already the best performer in Asia this year, having gained about 6% against the dollar, thanks to the strong recovery in the economy and the positive return advantage over US assets.
“The offshore yuan has strengthened beyond 6.60 and has the potential to rebound even further, especially if we see continued dollar weakness,” he said. “The yuan may rise to 6.45-6.5 by the end of the year or early next.”
Technological relief
While a Biden administration will continue to view China as a competitor rather than a rival, there will also be scope for cooperation between the two countries, and US trade policy is unlikely to be as volatile as it was under Trump, according to William Ping, Managing Director of Peaceful Investment Co. Ltd.
“I am planning to add exposure to stocks in telecoms and other 5G-related firms, anticipating more favorable conditions for key technology sectors,” he said. “At least, it means that Huawei lives.”
Inflection point
A shift in China’s focus will support entry into equity markets, said Brett McGonegal, chairman and chief executive officer of Hong Kong-based Capital Link International.
“Positive relations between the United States and China will be the growing theme that propels the markets of Hong Kong and China upward. The change that will occur in relations between the United States and China will generate a sense of global connectivity and not of dislocation or disconnection. “, said. open up China’s markets and help asset allocation to China. The long-term benefit will be the bond market. “
Restriction?
Because the showdown between the United States and China will be long-term, both sides should exercise restraint, the Evergrande Research Institute economists led by Ren Zeping wrote in a Wechat post.
“China’s best response is to promote reform and openness with greater determination and greater efforts,” they wrote. That will mean a continued focus on new infrastructure, urbanization and family planning policies to boost self-sufficiency, they wrote. – Bloomberg
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