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Diplomacy, Economics, Opinion

China better economic choice than US for the EU?

The EU should begin diversifying its outlook, and China should certainly be on its radar, argues one investor.


Written by

Updated: May 21, 2018

As China becomes ever more prosperous and America turns more inward, one investor argues that the European Union should focus its economic commitments to China rather than the United States.

According to Jan Dehn, the global head of research at Ashmore Investment Management, the US under President Donald Trump has become a risky prospect for investors with unclear fiscal policy while the stability of China presents an enticing opportunity.

Dehn argues that,

“The Donald Trump administration is moving away from long-standing commitments to sound fiscal policy and free trade, which supported the US’ economic growth for the past few decades. Inflation and currency risks due to US trade deficits are rising over the near-term in addition to the potential adverse consequences for the EU’s trade with the US over the longer term.”

With China, Dehn says:

“China is deleveraging rather than building up debt and pushing for greater globalization rather than withdrawing from the world. China is further opening up its markets as well as facilitating international trade via the Belt and Road Initiative. These policies are sustainable, ensure stability and are consistent with higher-trend growth rates than protectionist policies.”

Dehn makes the further argument that China, specifically its growing consumer market, will be the largest in the world for the next few decades.

Broken Deals

Europe has in the past months grown increasingly wary of the Trump administration. German Chancellor Angela Merkel has said publicly that the EU can no longer rely on Trump and that the relationship was ‘over to a certain extent.’

According to Merkel, Europe must “take our fate into our own hands.” While Merkel was speaking after a NATO summit with Trump, her statement has been backed up by several actions from the new administration including the US withdrawal from the Iran deal.

While the EU’s concern have so far been related to diplomacy and security concerns, economic considerations must be taken into account. The EU can look into Trump’s dealings with Asia, specifically China, as an indicator of the administration’s mindset – one that is increasingly protectionist and inward-looking.

The EU has already responded to Trump’s tariffs. After the US imposed steel and aluminium tariffs, European Commission chief Jean-Claude Juncker responded by saying:

“So now we will also impose import tariffs. This is basically a stupid process, the fact that we have to do this. But we have to do it. We will now impose tariffs on motorcycles, Harley Davidson, on blue jeans, Levis, on Bourbon. We can also do stupid. We also have to be this stupid.”

If Trump continues his policy of economic isolation, the EU will have no choice but to look to China and other markets to make up the loss. Perhaps, as Dehn argues, it is better to do that sooner rather than later.



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Cod Satrusayang
About the Author: Cod Satrusayang is the Managing Editor at Asia News Network.

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