Trade deal with US has profound implications for world

By Xiao Xin Source:Global Times Published: 2020/1/14 22:27:25

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A phased approach to de-escalate the China-US trade conflict has effectively worked, with the signing of a phase one trade deal expected this week. As part of the monumental deal, China will ramp up purchases of US products, notably farm goods and energy, in the foreseeable future. 

Understandably, global market watchers are waiting for the agreement text, especially the specific terms of China's purchases of US goods. Some observers may read too much - or too little - into the importance of the numbers and time frames. 

It's worth noting that China's offer to buy more US products, as part of the staged achievement, is by no means a one-off. The offer will have profound implications for global supply chains over a much longer term than the negotiated time frame for the purchases to be done. 

During the past two years or so, the global trade landscape took a hit from the US-initiated trade war. During this period, China's purchases of US goods have inevitably declined. The nation's US dollar-denominated imports from the US shrank to $122.7 billion in 2019 from $155.1 billion in the prior year, Chinese customs data showed. 

By contrast, China's imports from the EU, its top trading partner, grew 1.1 percent year-on-year to $276.6 billion, the customs statistics showed. 

The downward spiral in China's purchases of US products has arguably been a boon for the rest of the world, which sees the No.2 economy as a valuable importer that nobody in their right mind would risk missing out on. 

It could be said that the trade conflict between the world's top two economies has already reshaped global supply chains. The phase one deal that is set to revive China-US trade will again redefine the global trade landscape, adding new features to the ecosystem that has been updated over the course of the trade talks.  

Stock markets across the Pacific have priced in the good news and its resulting repercussions. US stocks, the NASDAQ and the S&P 500 in particular, have continued hitting fresh new highs. The flagship Shanghai Composite Index, for its part, has also held above 3,100 points in recent trading days. 

It's hoped that the phase one deal will be a new beginning for global trade, with the two major economic powerhouses joining hands to rekindle international growth. 

The author is a reporter with the Global Times.


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