US-China balance of payments
The United States is one of the largest markets for Chinese products and the former has faced a trade deficit for quite some time with its imports always exceeding the amount of imports. This gap swelled to $375 billion last year causing the US to initiate trade talks so that measures could be put in place to plug this widening deficit. US imports from China are mainly composed of electronics, machinery and clothing which amounted to more than $500 billion in 2017 while the exports amounted to only $130 billion.
Speculations of a trade war
While speculations are still rife of an impending trade war between two of the world’s largest economies, i.e. the US and China, negotiations between both countries have reportedly yielded positive results. While it was announced last month that China had agreed to cut its trade deficit with the US to around $200 billion, posts on Chinese State social media denied the claim.
With both countries threatening each other with tariffs in retaliation, the world watches closely as these two economic superpowers go head to head.
How China can benefit from a growth in imports
Every country has to maintain equilibrium between the amount of its exports and imports. While Chinese exports have substantially outweighed its imports for the past three years, there are a number of benefits that the country can achieve through easing its purchase of US products.
The Chinese Stock market
The Shanghai Composite Stock Exchange has been on a dive for the past week or so because of the trade tensions that we’ve so often discussed here. While experts believe that the economy in general and the equity market in particular has the ability to absorb substantial shocks in case a trade war does happen but continued losses can spell trouble for investors in the bourse.
There are developments happening on this front everyday and which direction future events force the economy to take is uncertain. What to expect from this clash of the titans only time will tell.
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