A Closer Look at the China-US Rivalry Ahead of the G20 Summit

Source: Forex News

China is the second biggest economy in the world. With a population of more than 1.38 billion people and a GDP of more than $11 trillion. The United States on the other hand is the biggest economy in the world, with a population of more than 320 million people and a GDP of more than $19 trillion. The two countries are among the biggest trading partners in the world with annual trade of more than $600 billion.

For years, the fear among many in the United States was about China. This is because many economic models show that the Chinese economy will pass the United States in the next few years. Therefore, the goal of many US presidents have been on how to contain the Chinese influence. This is because as its economy grows, the country will seek to play a bigger role on the world’s affairs.

The fear of China started during the Bill Clinton’s presidency. In it, he accepted the country to the World Trade Organization. His goal was to make China a better collaborator on the world stage. It was also aimed at helping bring democracy to the country.

After the country entered the WTO, things started to change. The country initiated a number of reform measures. Because of its youthful and well-educated people, many Western countries moved their manufacturing there. This led to tough periods in many states in the US that used to produce goods.

Moving to China made sense to many Western countries because their wages were really high. As their economies grew, Asian countries became large consumers of Western goods as well.

The integration of China had four main impacts. First, many industrial cities in the US were destroyed as companies moved overseas. Second, the manufacturing sector deteriorated. Third, most companies that tried to do business in China faced the challenge of IP theft and unfriendly business practices. For example, the companies were forced to make joint ventures with Chinese companies. This is the reason why many Western companies like Facebook have found it impossible to succeed in China. Finally, prices of most items in the US dropped. This is because manufacturers were able to reduce the cost of manufacturing.

American presidents have tried to solve this issue in a number of ways. Barrack Obama tried to create a large trade deal that would then speak in unison on China. The deal was torn apart by Trump who decided to impose tariffs on imported Chinese goods. This process is likely not a good one if the president wants to reduce the deficit. This is because tariffs have been met with counter-tariffs. The counter-tariffs have made it difficult for American companies to export to China. At the same time, American companies have retained Chinese manufacturing and adjusted the tariffs to the price. This means that America has been more hurt than China.

In the coming days, the USD/CNH will be watched closely as the leaders of the two countries negotiate on a trade deal. If such a deal works, it will be a success and the pair will certainly react. The key points you should likely pay close attention to are the 6.9600 and 6.9300.

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