Related: China Economic Concerns Continue to Weigh on Copper ETPs

China Prepared for Extended Trade War with U.S.

Ongoing economic issues could put China in a precarious position if trade wars persist with the United States, However, a white paper published by China last month revealed that the country can economically withstand the effects of a long, drawn-out trade war between the two economic superpowers, but it took extra measures for preparation when the Chinese central bank cut the amount of reserves held by banks.

The move was announced when the People’s Bank of China instituted a 100 basis points cut to the reserve requirement ratio for a majority of banks, resulting in a capital injection of 750 billion yuan or $109.2 billion to help shore up the banking system. The central bank confirmed that this latest policy move was done in accordance with the pace of the economy as opposed to an accommodative move.

Nonetheless, the words alluding to resiliency may be just that, according to some experts and that the situation is more dire than China is leading the markets to believe.

“China is probably facing its worst period since the global financial crisis. All news is against it,” said Fraser Howie, an independent analyst who has covered China and its financial system.

“They certainly want to play down any talks of panic or near panic … but they’re clear it’s not business as usual in China,” Howie added.

Trade War to Cause a U.S. Recession?

Ronald Temple, head of US equity for Lazard Asset Management, said trade wars could be one of the ingredients that could cause a U.S. recession. Temple recently told CNN Business that U.S. President Donald Trump’s protectionist policies with respect to tariffs could cause an economic slowdown in conjunction with rising interest rates.
“A recession in the near-term is not inevitable, but the risk of one by 2020 has increased substantially in the past few months,” Temple said. “Take trade wars off the table and that significantly reduces the risk of recession.”
“The days where we could have a trade agreement where China just buys more US stuff are probably behind us,” Temple  added. “It’s difficult to find how China and the United States come to a common middle ground on trade.”

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