Lev Garamov, financial expert of Russia and EU countries and Yunyan He, a Professor, PhD of Beijing Language & Culture University and Guangxi University for Nationalities "About trade war of the USA and China, and how it will make harm to the global economy." The two largest countries, leaders of the global economy, United States and China, continue a trade war which is an international subject of 2018. How will the trade sanctions make harm to a global economy we will discuss today.
Planet Today: Why did begin a trade conflict between China and the United States?
Yunyan He: a main cause of conflict is a monopoly in the high-tech market. Actually it turns from an economic conflict into a political conflict. Until now, United States has been a leader in the high-tech industry. This is a banal competition in the market and the introduction of sanctions shows how a US wants to control in this zone.
Planet Today: Does US have a reasoned need for sanctions?
Lev Garamov: given the quickly of Chinese high-tech development and given Chinese financial power they have a risk in the future to be completely dependent from China cooperation. For example, many regions in Siberia depends a most degree from China. For example, Russian wood industry is a most dependent of the Chinese economy now. Recently, China has expanded influence to the global economy through commodity markets and the financial sector. At present, China begins to get rid of the status of a “global factory of cheap goods” and is turning into a global exporter of quality products. So an introduction of import duties is often needed to hold a balance of the national economy and reduce of dependence from the production capacity of another country. The US Trade Representation has already introduced customs duties on imports of equipment for alternative energy from China, and plans to increase duties on imports of steel and aluminum products and modern autos. So Washington has limited investments from China to the high-tech US economic zone.
Planet Today: On which products did China make an embargo in response to US sanctions?
Yunyan He: So, the Ministry of Commerce of China announced the introduction of duties on 128 goods imported from the United States. The sanctions apply to the US energy sector: oil and liquefied gases, agricultural products and the modern automotive sector.
Planet Today: Does it mean that China wants a leadership at the production of global strategic technologies?
Lev Garamov: yes, of course. The United States is a leader in high technology and intellectual property but production power is limited they have many competitors among which China, Japan, South Korea, and Taiwan.
Planet Today: so, US dominates the global financial sector what do you think?
Lev Garamov: yes, the United States dominates the financial sector of the world. The United States has a greatest economy in the world in nominal GDP which is about a quarter of the global nominal GDP in US dollars. However, when analyzing the degree of purchasing power, the United States gives the first place to the China. The Chinese economy is still developing and the problem of poverty is significant. The situation in the domestic market of China is identical to the problem of the domestic market of Russia. At present, per capita GDP in China is too low unlike in the United States. But once China will strengthen the economy in the domestic market, it will begin to dominate the economy of any country. China has more than a billion of own consumers which need only be made solvent and if it happens then no country in the world can compete the economy of the China.
Planet Today: What could be the negative consequences for the US economy from trade sanctions for the China?
Lev Garamov: maybe, there have be a shortage of various goods and components, because China has a third place among the countries hold the global market for product exports, and Chinese exports are associated with American industry. And China is the largest holder of US Treasury bonds and so it has a power influence for Washington.
Planet Today: How can a trade conflict make harm Russia?
Lev Garamov: I think that the interests of Russia, in this case, the trade sanctions of China and the United States do not make a danger. For example, if raw materials, gas, our transportation and logistics capabilities, and the military-industrial complex make interest for China, then for the USA it is absolutely uninteresting. However, if other countries join the trade sanctions and the conflict becomes widespread, it will lead to an indirect negative impact on the Russian economy. In this case, the massive introduction of duties by different countries can damage the export market and destroy the Chinese economy which can lead to a decrease in demand and prices for the main Russian exports - oil products, gas, metals, and timber and so on.
Planet Today: How is China investing in foreign economy much?
Yunyan He: the China invests in the US economy much and Australian and Canada economies then. At the same time, the China shows investment interest for some African countries. Chinese investors are investing large capital in the US oil and gas industry and get most profit in the energy sector of Canada and the mining and processing of metals in Australia. At the same time, Chinese investments are not limited to it. For example, China is successfully investing in the chemical industry of Saudi Arabia.
Planet Today: Does it mean Chinese investors will be banned to buy shares US high-tech companies?
Lev Garamov: Of course. It is possible even buying minority stocks of high-tech American companies will be in a zone of special control.
Planet Today: However, a trade war of the USA and China will have harm on other countries?
Lev Garamov: quite possible. This is politic question and if the EU countries, South Korea, Japan decide to join the sanctions then it may to an escalation of the trade war and reformatting world trade because investments will be limited, and trade duties will inevitably affect global supply chains many countries. In this case, the financial damage will affect all parties to the trade conflict. The implications of introducing duties will have harm on small countries in Asia, such as Taiwan, Malaysia and Hong Kong. In fact, the trade war between China and the United States make harm the WTO system because begins a panic among investors.
Yunyan He, a Professor, PhD of Beijing Language & Culture University & Guangxi University for Nationalities, Lev Garamov, financial expert and business expert of Russia and EU countries.
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