How Biden’s Plan to Further Squeeze China’s Economy Could Impact the Economy

U.S. President Donald Trump recently banned American investment in important Chinese technical industries. President Joe Biden has confirmed that he will intensify his efforts to impede China’s economic growth, supporting Beijing’s claim.

With his recent prohibition on American investment in significant Chinese technological industries, U.S. President Joe Biden has backed up Beijing’s assertion that he will continue to step up attempts to obstruct China’s economic development. (Photo: 6do)

Washington and Beijing tug-of-war over currency has caused the yuan to weaken

In an article from Nikkei Asia, stopping the flow of money into Chinese quantum computing, semiconductor research, and artificial intelligence is a brilliant approach in this situation. On the other hand, Team Biden needs to be cautious about what it pursues.

Biden is aggravating the factors that are already tipping Asia’s largest economy off balance at the worst possible time as he directs new trade policy headwinds China’s way.

China entered deflation in July as a result of a sharp decline in loan demand, investment activity, consumption, and general morale. The decreases in industrial production keep getting worse and worse. As major developers falter once more, real estate investment is in rapid fall.

The biggest real estate developer in China, Country Garden Holdings, may default, ripping open a massive scab. News that Country Garden is delaying bond payments, which comes two years after rival China Evergrande Group started to have default concerns, demonstrates the financial system’s huge hemorrhage still going strong.

30% of China’s GDP can be produced by the country’s heavily indebted real estate market. As a result, the scenario is reminiscent of Japan’s bad-loan crisis in the 1990s. Additionally, it has China’s People’s Bank easing while the U.S. While the Federal Reserve works against it, the Bank of Japan is kept immobile.

The tug-of-war between Washington and Beijing over currency has caused the yuan to weaken.

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Biden’s economic team might want to think about more problems to give President Xi

A declining currency might help China’s exports, especially given how the Japanese yen is trending. However, a depreciating currency makes it more difficult for financially challenged Chinese developers to pay their dollar-denominated debts.

Additionally, it might geopolitically put China in danger. About the only issue on which Democrats and Republicans in Washington can agree is to impose trade restrictions on China. As the U.S. election cycle in 2024 heats up, China should anticipate receiving criticism from all directions.

Of course, when it comes to establishing his credentials for taking on China, Biden is far ahead of the Republican presidential candidates. Expect a bull market in fiery language as politicians excite voters at the expense of escalating risks in the bilateral relationship with Xi Jinping’s China, which range from trade tensions to COVID-19 consequences, article from 6do.

However, Biden’s economic team might want to think about whether it is advantageous for the world economy at this time to give President Xi more problems. The mainland stock exchanges will experience greater volatility the more money left China, which might have an impact on the rest of the world.

The fact that Biden is criticizing Xi’s economy for using unfair trade practices is admirable. However, it is impossible to ignore the concerns that the United States is compromising its own future by pushing too far.

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