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The China factor

Daryl Guppy
Daryl Guppy5/15/2020 06:30 AM GMT+08  • 6 min read
The China factor
What was once perhaps unthinkable must now be included in our immediate investment and business calculations. China is not sitting back in the face of this bully behaviour, so the investment horizon is still wide.
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(May 15): The US is seeking to insert a clause in the proposed US-UK free trade deal that would allow it to retreat from parts of the deal if Britain reaches a trade agreement with another country that the US did not approve of. The clause is based on Article 30 of the US-Mexico-Canada agreement that locks out non-market economies. British diplomats are worried this would give the US leverage over any UK policy towards China.

This forces the UK into a “them or us” situation and this is not a threat confined to Western countries such as the UK. It is a threat that will increasingly come to our regional trade relationships. How governments react to this will shape our investment options and market exposure. What was once perhaps unthinkable must now be included in our immediate investment and business calculations.

China is not sitting back in the face of this bully behaviour, so the investment horizon is still wide. It has been interesting to see the way the Belt and Road Initiative (BRI) countries have been embraced by China. Under BRI, China has created a trade environment that is very different from the US model, which is based on “Making America Great Again” and devil take the hindmost. China’s BRI has been far more inclusive and supportive of the World Trade Organization (WTO) framework that gives smaller countries a mechanism to counter the otherwise-overwhelming force of major trade powers.

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