03 June 2024

*** INCOHERENT AMERICAN TRADE POLICY: US Risks ‘Forever’ Trade War With China, Roach Says ***

  

Trade deficits are on the back of America, creating higher domestic costs

Roach told a dialogue held by the Center for China and Globalization on Friday that while China’s contribution to global economic growth is slowing, the country remains the most powerful engine in the world. 


Tariffs of more than $350 Billion on Chinese imports ...Claims of Overcapacity are Over done.
We need all the capacity we can get!

Stephen Roach, Senior Fellow at Yale Law School and former Morgan Stanley Asia chairman

Accidental Conflict: America, China, and the Clash of False Narratives

The misguided forces driving conflict escalation between America and China, and the path to a new relationship

“A timely, fluid, readable assessment of a testy and rapidly changing global relationship.”
— Kirkus Reviews (starred review)

In the short span of four years, America and China have entered a trade war, a tech war, and a new Cold War. 
  • This conflict between the world’s two most powerful nations wouldn’t have happened were it not for an unnecessary clash of false narratives. 
  • America falsely blames its trade and technology threats on China yet overlooks its shaky saving foundation. 
  • China falsely blames its growth challenges on America’s alleged containment of market-based socialism, ignoring its failed economic rebalancing.
In a hard-hitting analysis of both nations’ economies, politics, and policies, Stephen Roach argues that much of the rhetoric on both sides is dangerously misguided, amplified by information distortion, and more a reflection of each nation’s fears and vulnerabilities than a credible assessment of the risks they face

Outlining the disastrous toll of conflict escalation between China and America, Roach offers a new road map to restoring a mutually advantageous relationship.
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Stephen Roach, a senior fellow at Yale Law School and also former former Morgan Stanley Asia chairman, also the author. The book, I have it Here in My Hands ...
Bloomberg · Bloomberg · 3 hours ago

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2 days ago — Stephn Roachsenior research scholar of the Paul Tsai China. Center at Yale Law School, said: ... Roach, who is also the former chairman of Morgan Stanley Asia.

Consumption in focus after ‘biased’ recovery Analysts: Stronger supply side needs efforts to expand domestic demand 
By Ouyang Shijia ouyangshijia@chinadaily.com.cn 

China’s factory activity shrank for the first time in three months while the services sector expanded at a faster pace in May, pointing to a mixed picture amid uneven recovery among sectors, analysts said. 
The latest economic indicators point to an unbalanced recovery with the supply side stronger than the demand side, and the economy still faces challenges from the moderation in private consumption and the potential deceleration across housing activity, they said. 

Despite the pressures and difficulties ahead, the economic recovery will still be on track in the following months, driven by a ramp-up in fiscal stimulus, more monetary easing and further moves to tackle structural issues, they said. 

Their comments came as data from the National Bureau of Statistics showed on Friday that China’s official purchasing managers index for the manufacturing sector stood at 49.5 in May versus 50.4 in April, below the 50-point mark that separates growth from contraction. 

Zhou Maohua, a researcher at China Everbright Bank, said the manufacturing activity shrank in May due to the impact of the May Day holiday, while China’s nonmanufacturing activity remained in the expansionary territory amid improvement in the services sector. 
  • China’s services PMI grew to 50.5 in May from 50.3 in April. 
  • The country’s official composite PMI, which includes both manufacturing and nonmanufacturing activities, dropped from 51.7 in April to 51 in May, the NBS said. 
“The latest data point to a biased recovery with the supply side stronger than the demand side,” Zhou said. 
“More efforts should be made to spur consumption and expand domestic demand. The focus should be placed on speeding up the implementation of key projects and better implementing the announced property easing policies in accordance with various cities’ local conditions.” Robin Xing, chief China economist at Morgan Stanley, said 

China has made incremental progress in containing the risk of a debt-deflation loop, including a push for a faster budget rollout and increasing efforts to support housing inventory digestion. 
  • “We expect the augmented fiscal deficit to widen by 0.5 percentage point of GDP in both 2024 and 2025, though the focus may gradually shift from manufacturing upgrades this year to housing stabilization next year,” he said. 
  • “Meanwhile, there could be a 25- to 50-basis-point reserve requirement ratio cut in the next couple of months to facilitate government bond issuance, followed by a 20-basis-point policy rate cut in the second half of the year.” 

Stephen Roach, senior research scholar of the Paul Tsai China Center at Yale Law School, said: “China’s recent initiatives (to deal with the property downturn) are steps in the right direction
  • The property sector package has the right focus aimed at absorbing the inventory overhang of unsold housing units.” 
Roach, who is also the former chairman of Morgan Stanley Asia and the firm’s former chief economist, said the “funding support as announced by the People’s Bank of China (the country’s central bank) is too small”. 
  • “It’s going in the right direction, but it needs far more funding support to really make a major dent in the overhang of unsold housing units.” 
Looking ahead, he said policies need to be formulated more explicitly and more comprehensively to address the shortfall of domestic demand, especially in boosting social consumption in China. 
  • “Without the Chinese consumer, I think economic growth is going to remain a big question mark in the years ahead.” 
Roach told a dialogue held by the Center for China and Globalization on Friday that while China’s contribution to global economic growth is slowing, the country remains the most powerful engine in the world. 
  • He said it is advisable for the government to inject much more funding into the social safety net, healthcare and retirement. 
  • “I think that is the biggest impediment to discretionary consumption because it keeps families who are aging rapidly predisposed toward precautionary saving in providing for the future,” he said. 



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