China has a lot more to lose than the US in trade war, says Credit Suisse
- Trade is one of several areas where tension is rising between the US and China
- Rising tensions come as China faces economic slowdown
The possibility that the United States and China are closer to resolving their trade dispute has stoked optimism among investors.
But insufficient attention may be being paid to what happens if no deal is struck, according to John Woods, Credit Suisse’s chief investment officer for Asia-Pacific. No deal would be “profoundly negative”.
It would be the reverse of China joining the World Trade Organisation in 2001, which lowered or froze barriers the country faced to export its goods and paved the way for a near tripling of its share of global trade, Woods said.
“It’s quite clear to me that China has a lot more to lose than the United States and, hence, the apparent willingness of the authorities to go the extra mile and secure something meaningful,” Woods said.
The Shanghai Composite Index, the worst performing benchmark last year, jumped 1 per cent last week after US and Chinese officials made positive statements following trade discussions in Beijing.