The economy of China is improving and can register impressive growth. Nevertheless, the United States is the most significant risk which could derail that recovery. This is what the economist of Deutsche Bank said on Monday.
Much of the global economy is still recovering from lockdown measures imposed for containing the coronavirus pandemic. Restrictions included workplace closures. Moreover, stay-at-home orders significantly cut down economic activity worldwide. Thus, this year, it damped any prospects for growth.
China is the country where the coronavirus first emerged. The country is often cited as one of the few economies that can still grow. Michael Spencer is Deutsche Bank’s chief economist and head of research for the Asia Pacific. He said that, following a contraction in the previous three months, the recovery in China is “going to look very impressive”, with a growth of 5% or 6% quarter on quarter in April-June.
He told CNBC’s “Squawk Box Asia” that the domestic demand sector of the Chinese economy has recovered well.
A broad range of indicators is, for example, property sales and auto. Thus, Spencer said that a full range of indicators in China is returning to normal. The exports from the country have also been better than forecast. Nevertheless, in the next few months, it could get a lot worse, given the economic weakness in China’s major export destinations.
According to the economist, the most significant risk to the global and Chinese economy is the United States. Spencer explained that the United States reopened soon from lockdown measures too early. By doing this, it can trigger another wave of infections and a further round of restrictions.
Relation Between the United States and China
Furthermore, Spencer added that, despite a surprise jump in employment gains, that might leave the United States economy struggling.
Steve Hanke is a senior fellow at the American Libertarian think tank Cato Institute. He said that the United States economy could take many years to recover from the enormous damage.
On Monday, he told CNBC’s “Street Signs Asia” that to repair that, it is just not going to happen immediately. He does not think that they will reach the level of the pre-crisis gross domestic product until 2022 and probably way beyond that.
Hanke added that they had got a tough road to follow there.
Tensions between China and the United States have been worsening in recent months. Thus, Deutsche Bank’s Spencer said that the forecast is that this year will be compassionate.
The United States will hold a presidential election in November. The United States President Donald Trump will make China the central part of his reelection pitch. He will likely tout that he will be tougher on Beijing than his Presumptive Democratic challenger. This competitor being Joe Biden.
Spencer says that the rhetoric between the United States and China has already gotten very worrying. He thinks that this summer, it can only get worse. Thus, there is no prospect for the two countries concluding the second phase of the trade deal, adds Spencer.
In January, the two countries signed the phase one trade deal. That put a pause on their tariff war, which lasted over a year.
- Trading Instrument