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Quick Take | China has no idea how to play Trump, and is doing what it always does when it smells trouble

In the past, Beijing has reacted to economic challenges by opening its credit spigot and letting the money flow, and that’s what it has started doing this time too even though the mess from the last crisis is yet to be cleared

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China's President Xi Jinping and US President Donald Trump outside the Great Hall of the People in Beijing. Photo: TNS
Thanks to US President Donald Trump and his “America first” policy, the global economic and trade outlook perhaps has never been so uncertain. Nowhere are these economic and policy shock waves being felt more than in China. And, Beijing is responding the same way it does every time it anticipates trouble – by pumping cash into its system.

It has already used targeted reserve requirement cuts for select banks. This week the People’s Bank of China (PBOC) pushed US$74 billion into the system to get funds to the small-business sector. The State Council also announced US$200 billion of infrastructure spending to boost what were weak infrastructure numbers, while the currency fell to 6.8 to the dollar to take the edge off tariffs. It’s a playbook we have seen before.

A delegate holds up a sign at the Republican National Convention in 2016. Photo: AFP
A delegate holds up a sign at the Republican National Convention in 2016. Photo: AFP

Following the global shock in 2008 due to the financial crisis, Beijing panicked when a reported 20 million migrant workers had or were at risk of losing their jobs. After years of trying to bring financial discipline to the banks, they opened the credit spigot and let the money flow. That stimulus, hailed at the time as the saviour of global growth, is now one of the main causes of the debt dependency which Beijing still struggles to rein in.

US-China trade war: who wins, who loses?

To some, Beijing’s rapid fiscal and monetary moves may seem like strength: it is proactive, decisive and has the financial capacity to act to avert the worst. But in reality, it is a sign of utter confusion. Trump has clearly thrown China off kilter.

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