Trade war fallout on China is not as bad as the numbers imply, Stephen Roach suggests

Source: CNBC.com

One of Wall Street’s leading authorities on Asia believes China is in no rush to cut a trade deal with the United States.

Despite China’s worst quarterly growth number in 27 years, Yale University senior fellow Stephen Roach contends its economy isn’t as bad as the latest figure implies.

“I was in China last week, and the general sense was that the economy was slowing in the manufacturing sector. The larger, more rapidly growing services sector was likely to provide a source of resilience,” he said Monday on CNBC’s “Trading Nation. ”

Roach, who lived in China from 2007 to 2012 while he was chairman of Morgan Stanley Asia, still regularly meets with government officials, business executives and academics in the region. During his latest talks, he didn’t observe a heightened sense of anxiety over the ongoing trade war.

According to Roach, the climate suggests China will resist moving aggressively to cut a trade deal out of economic slowdown fears. Unless the trade war with Washington escalates, Roach contends China’s coping strategies will be effective.

“China has ample policy space to continue to address the downside of its current growth trajectory,” he said in a note to CNBC, citing monetary, fiscal and currency issues.

“They’re focused on doing a lot of strategic things to their economy,” Roach added.

Roach has been against the trade war, concerned that Washington is being too aggressive. Following President Donald Trump’s tariff threats in a series of May 5 tweets, Roach told “Trading Nation” that odds of a trade deal were rapidly receding.

Even though Roach believes the trade war is in a standstill, he thinks a resolution may not be in the cards this year.

“I don’t think they necessarily want to wait it out, and they certainly don’t want to wage a bet on the outcome of the 2020 elections,” Roach said. “But they certainly would hope if there is a change in administration, it would be less confrontational and more committed to returning to a more of a strategic partnership.”

 

 

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