JAKARTA (TheInsiderStories) – Following the Group of 20 (G20) meetings, the temporarily de-escalates hostilities between the United States (US) and China, said Atsi Sheth, Managing Director, Credit Strategy & Standards at Moody’s Investors Service today (12/03).
However, he rated, US – China relations to remain contentious. The narrow agreements and modest concessions in their ongoing trade dispute will not bridge the wide gulf between their respective economic, political and strategic interests.
As the world’s two largest economies, US and China are too strong to cede their respective national interests in negotiations with each other, he added. However, an economic cold war that leads to decoupling would be costly for both countries, owing to their deep links with each other.
Therefore, Sheth stated, the relations between the two powers will swing between conflict and compromise. Furthermore, tensions between the US and China will affect global credit conditions in four key areas namely trade, technology, investment and geopolitics.
US-China tensions will cast a pall over global credit conditions and quality. The impact will be felt at the global, country, sector, and company level.
According to him, continued tensions would disrupt global trade, erode the effectiveness of the multilateral international trade regime and dampen growth.
“As every new development is reflected in financial markets, it will affect valuations and borrowing costs for many debt issuers,” said Sheth.
At the sovereign level, he explained, Moody’s watching growth, investment and policy responses along with confidence indicators, such as capital flows and exchange rates. At the sector and company level, possible changes in trade, supply chains, investment and competitiveness will affect revenues, costs, profits, and leverage.
Asia’ economies that are deeply integrated in regional and global tech and trade chains, including Hong Kong, Korea, Malaysia, Singapore, Taiwan and Vietnam, are most exposed to significant and lasting disruptions to trade and investment.
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