NAB Morning Call Weekend Edition: A pragmatic Trump and a determined China
May 30, 2025
Yan Wang, Chief Emerging Markets & China Strategist at Alpine Macro, breaks down the complex dynamics of US-China trade relations. She believes that the worst of the tariff dispute may be over, with China needing to achieve its 5% growth target. Yan explains how Trump might accommodate some of China's economic demands, suggesting a path forward with less volatility. She also discusses the yuan's fluctuations, the evolving trade strategies, and Australia's crucial role in this intricate economic landscape.
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China's Need for 5% Growth
- China must meet its 5% growth target to maintain social stability and demonstrate economic resilience amid trade war pressures.\n- Achieving this target is both a political and economic imperative for China this year.
Fiscal Stimulus Needed Over Monetary Policy
- China's monetary easing faces a liquidity trap due to weak demand for credit, requiring a fiscal stimulus to boost consumption and infrastructure.\n- Public sector spending is necessary to overcome borrowing hesitations linked to housing market issues.
China vs Japan Deflation Risk
- China is at risk of a Japan-like deflationary scenario if fiscal easing is avoided but still has growth potential due to lower per capita productivity.\n- Unlike Japan, China can grow by advancing industrialization and urbanization with proper policy mix.