Chinese President Xi Jinping attends the closing session of the National People’s Congress (NPC) in Beijing’s Great Hall of the People on March 15, 2019.
Wang Zhao | AFP | Getty Images
U.S. and Chinese negotiators wrapped up a brief round of trade talks this week with no deal and only a plan to resume discussions in September. U.S. President Donald Trump, meanwhile, has repeatedly accused Beijing of dragging its feet in the negotiations, and upped the stakes on Thursday with a surprise increase in tariffs on Chinese goods.
Still, that may not be enough to spur action from Beijing.
“In terms of time frame, I would argue China has greater pain tolerance,” said Eric Robertsen, head of global macro strategy at Standard Chartered Bank.
Indeed, Trump’s “No. 1 priority” is to get reelected next year, and China is trying to wait out the American election cycle, said Robertsen, who is also Standard Chartered’s global head of foreign-exchange, rates and credit research.
“China, very clearly, is trying to wait out the U.S. election cycle with the hope that maybe we get somebody different in the White House, ” he added.
On Thursday, Trump announced that the U.S. is placing 10% tariffs on another $300 billion worth of Chinese goods, effective Sept. 1. In May, the U.S. raised tariffs from 10% to to 25% on $200 billion of Chinese imports. Trump accused Chinese President Xi Jinping of not moving fast enough on making a deal happen.
Meanwhile, Beijing is likely to use fiscal rather than monetary stimulus to prop up its domestic economy, said Robertsen.
Notably, the People’s Bank of China did not cut rates in the wake of the U.S. Federal Reserve’s latest interest rate cut this week. Robertsen explained that move as likely demonstrating China wants a stable currency to attract capital to its onshore markets.
Historically, China has had a “credit impulse” when it wants to boost the economy, with real estate borrowing growing during such times. However, a top decision-making body of the ruling Communist Party said this week that China will step up efforts to boost demand and support the economy, but will not use the property market as a form of short-term stimulus.
—Reuters contributed to this report.