Firms need to prepare for new low in US-China ties

Source: Global Times Published: 2020/7/26 19:29:46

Photo: GT

While US-China tensions escalate with a fresh tit-for-tat exchange of consulate closures, it may not be the lowest point in the deterioration of US-China ties as the world's largest economic relationship has yet to hit rock bottom. For Chinese businesses and investors, this means that things could become far more challenging in the coming months, and they need to get prepared for the unexpected. 

So far, Trump administration's measures against China - ranging from its pursuit of technological decoupling, to its interference in Hong Kong affairs, sanctions against Chinese officials and its move over the South China Sea, among others - have gone beyond the expectations of many in political and academic circles. 

For the two countries that have long shared extensive economic cooperation, it is unusual and rare to see their relations is disrupted so abruptly by the US side  without any warning.

Some observers attribute Washington's hostile attitude toward China to the upcoming US presidential election. Since the November event is still a few months away, the worse may be yet to come. This is because it is likely that the Trump administration will continue to play the China card to win more votes. 

Last week, a report from the US Labor Department showed that the number of people filing for weekly unemployment benefits rebounded again, reaching 1.4 million for the week ending July 18, as several states rolled back reopening orders amid a resurgence of coronavirus cases. To a certain extent, this could be a sign that US economic recovery could be harder than expected without its effective containment of the pandemic. 

Under the current circumstances, Republicans, Democrats and their candidates can hardly come up with an effective solution to address domestic problems, which could somehow explain why both parties are getting tougher on China these days. Through bashing China, the politicians in Washington wanted to vent their frustration and attract votes. 

It is predictable that the US-China economic relationship may face greater challenges in the coming months, as a further deterioration of bilateral ties will inevitably spill over into such areas as economic and trade cooperation.

During the process, Chinese businesses need to prepare for a worst-case scenario in US-China relations and avoid being targeted by the Trump administration as a crackdown excuse against China.

At the same time, we still want to call for rationality from the US side. A constructive dialogue to de-escalate tensions is always needed and welcomed.

Historically speaking, election time is always a cold time for US-China relations, as being tough on a rapidly developing China is seen as an effective strategy and a politically correct standard for the candidates, which is particularly evident this year. Yet, given the economic links between the US and China, all the anti-China measures will not be sustainable for long. Some US politicians may have been trying to push US companies to move out of China, but it is a misstep, if we just ponder the fact that the US economy cannot truly decouple from an Asian supply chain led by China.

Posted in: GT VOICE

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