Trade conflict: China can't do much for the mighty US

The uncertainty in China about the escalating trade conflict is great, says Chinese economist Zhang Jun. He advises the government: just don't escalate too much.

Trade conflict:   China can't do much for the mighty US
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    Zhang Jun, 55, is director of China Center FürWirtschaftsstudien and dean at Economic Institute of Fudan Universtät Inshanghai.

    Online Time: Mr Zhang, how dangerous is US trade konfliktmit for China?

    Zhang Jun: The damage to punitive duties Hältsich to date has been limited. But Donald Trump has already made it clear that he with not satisfied with measures taken so far and has announced furr punitive duties. Then it could be bitter. China is now zweitgrößteVolkswirtschaft of world. Trade with USA in particular was decisive for Chinaswirtschaftliche development and has made country a huge advance. A trade war between world's two largest economies brings considerable damage in all respects: for China, for United States, for whole world.

    Time Online: The Chinese leadership is asserting that country Seiauf a trade dispute well prepared. You don't believe in it?

    Jun: No, I share this assessment Tatsächlichnicht. Even now, trade conflict is providing enormous uncertainty among Chinese entrepreneurs. You can no longer estimate what is going to happen in next few months. Trust is re. Not even mehrdie government dares to predict how and wher this conflict can gelöstwerden. Currently, China exports were worth 508 billion dollars a year in US. That's a huge chunk.

    Time Online: What strategy is China currently pursuing?

    Zhang Jun © private

    Jun: The Chinese government has imposed customs duties. But that will not be same in next round. China cannot impose as many punitive duties on US goods as or way round. Because China does not import so much from USA. Beijing has now announced measures of both quantitative and qualitative nature. What ChinesischeRegierung most likely means: There are many US companies that are active in China and have invested a lot. She could hit it right now.

    Online Time: Could China devalue its currency, renminbi, and thus ensure that Chinese exports günstigbleiben?

    Jun: This is no longer so easily possible – even for Chinese leadership. The Renminibi is now no longer only linked to Andean dollar. The value is based on a basket of a ganzenReihe of currencies. It is much more strongly determined than before by market. If renminbi is a bit weaker than it is at present, it will be linked to uncertainties of trade dispute. And a weak renminbi is also not in interest of leadership in Beijing. Because that means that capital flows from China and foreigners invest less in China. We already see first signs of this.

    Online Time: China holds huge dollar reserves and istdamit largest creditor in US. Could Chinese Trump non-simple tap?

    Jun: It's not that simple. Even sale of a small part would push price of bonds. And since Auchandere creditors would be affected, y might also sell. As a result, a downward spiral could occur. In turn, value of VerbleibendenUS papers would dwindle. China would have harmed itself. In fact, Chinese government has been in process of reducing this interdependence for several years and is buying less government bonds than in past. China wants to diversify its foreign exchange reserves more. But this can only be done slowly and cautiously. A raschesAbstoßen of US government bonds could trigger a global financial crisis.

    Date Of Update: 27 July 2018, 12:02

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