USA Vs China: The Impending Cold War & Its Effect on Both Economies

Written by: Jennifer Watkins
05/19/2019

us-china-economics

When the world’s number one economy is having trade issues with the worlds number two, you bet that the world as a whole is bound to take note. Despite the talks that have been taking place in Washington in the last couple of days, the two superpowers are yet to reach a solution. The latter means that the two countries are bound to feel the itch, especially if they aren’t going to reach an agreement soon.

At this point, China seems to be the ones who are bound to lose if the cold war between them and the united states of America continues, a fact that the USA government is aware of and is looking to take full advantage. However, if anything the experts are saying is anything to go by, then it seems as though Xi Jinping, who is the seating president of China, is bound to benefit in the long run.

The current situation has been triggered by the distrust between the two largest economies, something that has been growing in the recent past. The two nations are going back and forth with spy allegations and copying of other countries technology. Some claims also point towards the possibility of white color crimes, and the list keeps on going.

The wrangles plaguing Huawei company is also not looking that good as far as China is concerned. The whole world can now use that as a pretext to see that China is at fault and the US government doesn’t have to do anything but wait and see while the Chinese government continues to sabotage itself. However, that doesn’t mean that China cannot get themselves back in the game.

Both the Chinese Export Data, as well as the Quarterly GDP, were well on their decline, unlike that of the United States. However, that doesn’t mean the Chinese industrial production is on the decline at any given moment. Moreover, that is also another reason why China may be down but not necessarily out, and the United States government should always be on the lookout at all times.

How China Will Be Affected by The Cold War

The cold war means the two governments will not be exporting as many goods as they used to in the recent past. Moreover, since the Chinese economy relies heavily on what they ship to the united states of America, which has a vast consumer base, their income will drop. Of course, China is making ends meet by finding other new markets to export. However, the fact remains that the US has a considerable consumer base, and losing it will affect the Chinese economy as we are already starting to see.

According to the most recent Chinese trade data, the exports to the united states dropped to a -4.4% while the imports recorded a -7.6% within the same period. So one may ask, how will China’s economy be affected by this impending cold war? Well, for starters, a lot of Chinese people are going to lose their jobs, in the long run, thanks to the lower export numbers that are already being recorded as we speak.

Moreover, with the unemployment rates rising, you can always expect the Chinese economy to take a hit immediately, which is precisely what the American government is counting on, that’s unless they reach a point where they agree. Then everything would be on a downward trend for China from this point onwards, which would prompt for the Chinese government to strike a deal with the united states government in a bid to avoid the Chinese Yen to reduce in value.

China can still counter by stabilizing its growth by sacrificing a few sectors that are deemed economically unsustainable. The two industries that China might allow to take the hit at a provisional level includes the banking sector as well as the real estate sector. They would then try and stabilize other areas to ensure that no jobs are being lost because if this happens, they will end up suffering a great deal in the end.

If the Chinese government doesn’t move fast, then the chances are that they are going to suffer even more as the months go. They will only be left with two choices, to either sign a fitting deal with the US government or go on the defensive, sacrifice a couple of sectors, and prevent the loss of jobs. China also has to find somehow a way to fix their decline in demand, which is slowly resulting in inflation as prices are dropping on a plethora of commodities such as oil as well as technology.

This trend continuing can lead to the Chinese government’s instead blossoming economy to come to a screeching halt, which is yet another move that the US is counting on as far as pressurizing China into signing a favorable agreement with them is concerned. However, even though China seems to be held between the proverbial rock and a hard place, there are ways that they can use to redeem themselves.

How China Can Even Their Odds

Even though the Chinese government looks as though they are losing, they still have a few cards that they can still play and end up turning the odds to their favor. One of such cards is the fact that they don’t have any pending elections coming any time soon, which is not the case as far as the united states government is concerned.

As we all know, elections do an excellent job at destabilizing any country, which China can take full advantage of and end up gaining some mileage. So all the Chinese government has to do is get its’ house in order’ long enough for the US elections to happen before their economy goes down the drain. If they can pull this one off, then they’ll be in a perfect position when all is said and done.

If Trump loses, then there are chances that his predecessor might not be concerned about chasing the cold war to a bitter end. Moreover, if that’s the case, then China and the US can resume with how their relationship was before trump happened. Another win for China would come in the form of strengthening the ties with Vietnam, which has become a massive consumer of Chinese products.

The Chinese can also count on finding cheaper labor in Vietnam, which will mean they won’t hurt as much as the US expects them too. China also knows that the cold war is also destroying some of the biggest companies in the US, including Apple. Therefore, if they just hung in there a little longer, then chances are that they will lose enough to prompt new talks soon.

China also knows how trump loves gloating about the stock market. Meaning that if they continue with the trade war, the US stock market is likely to start plummeting, which will, in turn, cause him to go easy on the trade deal which he currently isn’t. So all they have to do is wait and see what happens. However, as the two countries are waiting, both their economies are continuing to take hits.

Conclusion

At the moment, the United States government has the upper hand in the cold war. However, that doesn’t mean that things can’t take a twist for the worst, forcing president trump and president Xi Jinping to suspend their economic wrangles to give their countries some time to heal from adverse effects of the cold war. That said, all they can do at this point is to wait while waiting to see which of the two takes the first bow. However, as earlier mentioned, the more they remain, the citizens of both countries continue to make significant losses in the process.


LIKE US ON FACEBOOK   

Related Posts


USA Vs China: The Impending Cold War...

Share Tweet