China’s central bank gears up for trade war, Trump deserves ‘one out of three cheers

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27 Jun, 2018

China’s central bank gears up for trade war, Trump deserves ‘one out of three cheers’

As China’s central bank frees up funds for a looming trade war, Trump deserves at least ‘one out of three cheers’, affirms a senior analyst at one of the world’s largest independent financial advisory organisations.

The comments from Tom Elliot, deVere Group’s International Investment Strategist, come as U.S. President Donald Trump appears to be on the cusp of escalating his trade war with China.
Mr Elliott observes: “This week, the Trump administration is likely to reveal plans to limit Chinese investment in American firms and block the ability of U.S. companies to some high-tech products to China.

“Meanwhile, China’s central bank reducing its reserve requirements for its banks is significant. Is it just to add pressure on the U.S., by looking like they won’t back down and are preparing the economy for the worst? Or do they actually think no agreement to avert trade wars will be reached and that this is necessary?”

He continues: “Relaxing bank reserve requirements allows banks to lend out more money than previously was the case. It’s traditionally something they do if the economy looks set to weaken. Of course, they aren’t publicly linking the two because the Communist Party would want to avoid a situation whereby the Chinese population sense their leaders have ‘lost’ a trade dispute.”

Mr Elliott goes on to say: “The escalating dispute with China is as much about legitimate U.S. security considerations as it is about Trump’s apparent lack of understanding of the benefits of free trade.

“The Trump administration objects to what they see as the stealing and forced licencing of U.S. technology, by China, from American companies that do business in China. And the lack of access to the Chinese market for U.S. businesses in general, despite China’s membership of the World Trade Organisation (WTO) and numerous trade agreements.

“On this the EU, Australia and Japan are in agreement, but show far less willingness to stand up to China. So, Trump deserves at least one out of three cheers for what he’s doing.”

Earlier this week, Nigel Green, the founder and CEO of deVere Group, commented: “There really hasn’t been any major asset class or any part of the world Trump hasn’t spoken out against in recent weeks. As such, if investors are serious about growing and safeguarding their wealth, complacency should no longer be an option. Vigilance is crucial.

“Now is the time for investors to ensure that their portfolios are properly diversified.

“As history teaches us, diversification is the best way an investor can position themselves to mitigate risks - and also, importantly, to benefit from the buying opportunities that all bouts of market volatility present.”