The US-based rating agency, Moody’s Investors Service, is out with their assessment on the China-US trade dispute, outlining the probable scenarios.
“Moody's does not believe that China can satisfy US requests to reduce its trade surplus with the US by $200 billion by 2020 without causing significant disruptions to its economy.
Moody's also does not believe that doing so would be acceptable to Beijing, as the measures that it would need to take to achieve Washington's goal would be incompatible with the Chinese government's policy objectives.
Neither government has publicly declared its latest demands but, according to widespread media reports -- confirmed by the US-China Business Council as accurately representing the Trump administration's position -- the US requested that China cut its trade surplus with the US by USD200 billion by 2020.
Moody's believes that the required adjustment to trade flows would be implausibly large for China Reducing its trade surplus with the US by USD200 billion would bring it back to levels last seen in the mid-2000s, reversing trade flows that have built up over the past 10-15 years.
Such a rapid shift generally involves a very sharp slowdown in GDP growth and imports by the deficit country, which is not the objective pursued by the US.
More broadly, the US requests that have transpired relating to industrial policy, investment and intellectual property are at odds with China's focus on innovation-led movement up the value chain.”
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