The world’s two leading countries, the USA and China are in front of a financial war. After the coronavirus pandemic, the global economy has suffered a lot and countries have been trying to overcome the economic risk and save the financial sectors. The last thing the world needs right now is the escalation of the possible trade war between the world’s two largest economies, but the danger seems inevitable. The Trump administration is prepared to take the risk and start the first shot in a new financial battle against China.
Trump still blames China for the origins of Covid-19, however, clearly, other countries also have made serious errors that made the pandemic worse. This is why many countries believe that Trump’s claiming that China should pay for the outbreak is nonsensical. However, according to the Financial Times, coronavirus isn’t the only concerning reason for the investors and it’s among human rights abuses, assisting Beijing’s surveillance state, or dangers of national security to the US.
What would be the consequences for the rest of the world?
Nobody knows for sure what kind of dynamics will come out of the US-China financial war, but it’s reasonable to expect a reduction in income, an increase in unemployment, and a fall in asset prices.
Currently, the claim from the White House that China should pay financial compensation for the pandemic may sound irrational but even if China won’t pay anything, this kind of financial threat often poses dangerous risks to the economy. Investors may begin to worry that China’s market won’t be stable enough and change their minds about investing in local businesses. As a result, the country may face an economic crisis and the rates of unemployment may increase. When this happens, usually people try to find alternative ways of income. And one of the most popular among these ways is forex trading.
The effects on the FX market
As a result of the intriguing political actions, it’s expected that the number of people participating in activities like forex trading in China will grow. The above-mentioned political machinations will probably correlate directly with the growth of any top forex brokers list worldwide because if there’s stability, not too much is happening with the currencies, and volatility is something brokers are fond of. Experts think that if the United States continues to threaten China and make sanctions against it, the number of people from China taking part in the forex industry will grow.
Possible danger to Washington
As the wide society is worried about the upcoming financial war, and entrepreneurs from China think that it may cause serious problems to their businesses, the former Mayor of Chongqing, Huang Qifan, doesn’t seem worried at all. He believes that China’s economic and financial links with the United States are too worthy and the White House won’t be able to take this major step and create financial sanctions against China.
As Qifan says, the financial realm of the US may hurt China by 1000 but by taking this step they will hurt themselves by 2000, which is equal to an attempt of suicide for Washington. Now the Trump administration is facing a deadline after 90 days of the Hong Kong Act to identify the people who started the so-called breakdown of Hong Kong’s autonomy.
Although Trump tries hard to get Wall Street or the US business community to go against China, the former mayor believes that he has no right or authority for doing so. People are certain that the US will broad financial sanctions against China and try to restrict its access to US dollars. The reason why everybody is concerned about it is that the USD is the dominant currency in international trades and payments and limited access to it will probably worsen China’s overall economic situation. But if the mayor is right, it’s not gonna happen.
For many years, the US government bullied huge economies such as Russia, South Korea, and Southeast Asia by using its financial power and restricting access to its national currency but this time Huang Qifen is sure that this strategy won’t work for China. The country possesses a powerful weapon to protect itself from any potential financial sanctions by the US. Particularly, capital flows in China are limited and the influence of foreign ownership in the country’s financial system is pretty small.
This is why the chances that Trump’s attempts to control China’s economy are small. Indeed, China’s financial connection with the US is too valuable for the American business sector and investment banks of Washington.
Some people find the former mayors forecast reasonable and believe that sanctioning China will have a dangerous effect on the whole financial sector of the US. Among them is Guan Tao, a former official with the State Administration of Foreign Exchange, who believes that there’s no chance that the Trump Administration will make China abandon the international payments system. As he says, the US can’t decide whether to block China from the US dollar payment system or not.
If they are right, the financial sector of China may survive, but otherwise, it will experience a huge decline. In any case, the world is waiting impatiently to find out how the relations between the two giant countries develop.