Tensions between the US and China are unlikely to cease completely and risks linger in the next phases of negotiations, despite a phase-one deal over the weekend, Australia and New Zealand Banking Group (ANZ) said yesterday.
Drafting an agreement can be a tricky process and the sudden breakdown in the April-May negotiations is a good example of the difficulty of the process, ANZ said.
The trade talks have been much anticipated in Taiwan, as the US and China, the two largest economies in the world, account for nearly 60 percent of the nation’s overall exports.
An agreement was almost completed in early April, senior US officials said, but the two parties failed to proceed to the final stage.
“So we should be watchful of the possibility of such risks for the November agreement,” ANZ said.
In addition, the tentative agreement mainly covers agricultural purchases, tariff suspensions and market access. The US-China tensions have gone far beyond the trade sector, extending to the technology and financial sectors, while the ban on Huawei Technologies Co (華為) and the recent blacklisting of more Chinese high-tech companies are still in force, it said.
ANZ said the potential battles in the financial market cannot be neglected either.
The US has labeled China a currency manipulator, and recent news headlines suggest that the US is considering a limit on investment flows into China’s financial market, which might pose a high risk of financial decoupling between China and the US, ANZ said.
Regardless of the final outcome, the trade talks will not change China’s economic policy, and China still aims to boost domestic demand and support local technology development, while its trade outlook is unlikely to improve significantly, it said.
China’s exports are closely tied to the business cycles of the global smartphone and semiconductor industries, which remain gloomy despite some holiday demand, it said.
“We maintain our view that measures such as a large-scale stimulus and aggressive monetary easing are not preferred by Chinese policymakers,” ANZ said.
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