Robb warns of trade war currency turmoil
Publication: The Australian
Author: Glenda Korporaal
US President Donald Trump’s trade war with China could lead to currency fluctuations and a major reworking of global supply chains, Australia’s former Trade Minister, Andrew Robb, has warned.
At the Sino-International Entrepreneurs Summit in Wuhan, Mr Robb said 2019 would be a year of continued uncertainty and “global headwinds to growth” as a result of President Trump’s trade barriers and his “attack on the global supply chain”.
“It could lead to further currency volatilities as trade-affected countries respond by seeking competitive devaluation,” he said.
“We will also see nationalistic forces signal a move away from the highly beneficial globalisation trend of the last 30 years.”
He said the rise of protectionism and Mr Trump’s trade war with China would see a “move towards alternative supply chains, including local production in the US and China, and other places as countries respond”.
He said the US had shifted suddenly from a “broadly collaborative approach to China” since President Richard Nixon recognised Beijing in the 1970s to “a more confrontational approach designed to contain China in some way”.
“The recent escalation in barriers to free trade is an undeniable attack on the traditional global supply chain and one that will not be easily repaired,” he said.
He said the “old world model of globalisation, which revolved around the US buying low-value Chinese goods while China used its capital account surplus to develop infrastructure and buy real estate assets overseas and US Treasuries” was over.
“Last year, China was a net seller of US real estate by a big margin,” he said, adding that exports as a percentage of China’s economy had halved from 36 per cent to 18 per cent over the past 10 years.
At the same time there was a growing force of almost 300 million Chinese “millennials” born between 1980 and 1994, aged between 24 and 38, who are in the middle-income class.
These were very different consumers than their parents, looking for new things to buy, including better food, healthcare products and experiences such as travel, movies and theatre.
“In China the exploding 300 million millennial population is rebalancing the Chinese economy and reshaping global consumer markets,” he added.
Mr Robb said the trade war with the US would accelerate the transition in the Chinese economy away from one based on manufacturing to a domestically based service economy.
He said China’s move towards making higher value goods and services had created some inevitable trade tensions as its companies were now competing on a global scale against major Western companies.
But the changes in the Chinese economy were also creating new opportunities for foreign businesses, he said.
Glenda Korporaal attended the Optics Valley Sino-International Entrepreneurs Summit as a guest of the organisers.