The world is going through a period of tension and anxiety. Two economic superpowers have been moving on the path to a possible collision. Though these powers are strong, they can both lead to considerable damage to the world and their own economies too. While China and the US have been trying to turn their backs to a trade war, tension is imminent. However, the first lukewarm meeting between the presidents of the two nations wasn’t too inspiring. China could be on the receiving side of damages if a war begins. The country has the biggest balance of trade gap with the US and a trade war means a massive loss. It would be in China’s favour to avoid such a confrontation. Here is what it is doing to keep things under control.
The meeting of the presidents came out with a basic plan for the next 100 days. It is being done to overcome the biases in the trading regime of the countries. It is by far the most important outcome of the meeting as it aims to lower the tremendous trade imbalances. US has been hit hard by this trade deficit. China has been accused of lowering the value of its currency to maintain high exports. In turn, both the nations have been suffering because of sluggish economic growth. Both countries have agreed to find out ways to increase US exports to China to diminish the huge trade deficit. Chu Shulong said “Trade is the most worrying issue for the US and China. But it looks like a trade war can be averted for at least the next 100 days while the two sides negotiate’’.
New Platforms for Investment
China has promised that it will increase the scope of foreign investment in its economy. China has mostly been a closed economy as it hardly allows foreign nations to invest in its financial sector. But, the time is ripe that it opens the gate for larger foreign investments to boost its economy. USA is highly interested in Chinese market and will be the biggest foreign investor if China allows. Thus, China has decided to please the Trump administration which believes in quick solution to the trade deficit.
One of the main reasons for imbalances in trade is the high number of Chinese exports to the US. China has come up with the idea of reducing large amount of export to the US and increasing the exports from America. Andrew Nathan stated “US negotiators are pushing on a door that is relatively easy to open when they place a priority on improving the trade balance not by limiting Chinese exports to the US, but by increasing US exports to China”. Experts are not sure about China’s main motive behind holding back its own exports. For now, it surely has satisfied the US president.
It seems that China is doing all it can do to avoid a trade war with the US economy. But, some US officials have also shown concern over the sudden change in China’s attitude. China has suddenly become passive aggressive and no one can predict the outcome.