Economic Stakes are High for US-China Tensions

Geopolitical Changes are Afoot These developments coincide with a series of major speeches on US-China relations by key members of President Trump’s administration.

The essence of these pronouncements is that US-China relations are nearing an irreconcilable impasse, arising from the two nations’ vastly different systems of governance and economic management.

US assumptions around the eventual convergence of these two systems have radically shifted, hence Trump officials believe a re-orientation of long-standing economic and political arrangements that have brought these nations closer together is now required.

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China’s position is that the normalisation of diplomatic relations has always been premised on an understanding that there are stark differences in each country’s social systems, but even greater shared interests.

US elections looming in November mean that one major source of uncertainty is whether the Trump administration will have time to enact such a reorientation.

Another key question – under a Trump re-election – would be how these policies would be implemented. Economic Linkages vs Political Brinkmanship.

We believe tensions will persist regardless of the outcome of the US elections, as reflected in sharply changing American attitudes towards China in independent polls.

At the same time, China’s vast global supply-chain linkages and extensive US business interests in China are likely to serve as a moderating force.

The extent of these linkages include:

i) USD1.2 trillion in combined assets and USD625 billion in annual sales from US and Chinese multinationals operating in each nation’s respective territories,

ii) a bilateral trading relationship worth over USD600 billion, and

iii) significant value-added content from both Chinese and American suppliers in each respective domestic economy.

https://www.fitchratings.com/research/sovereigns/china-perspectives-economic-stakes-are-high-for-us-china-tensions-13-08-2020