Business communities on both sides of the Pacific are increasingly alert to the happenings on the China-US trade front. They are considering in tandem the outcome of a disrupted global value chain, hindered cross-border investment, and increased consumer prices, among other affected areas.
The trade friction may greatly affect the business activities of both domestic and foreign enterprises, particularly those involved in China-US import and export businesses. In the scenario that billions of dollars worth of Chinese exports to the US market are to absorb the impact from additional tariffs and with China taking retaliatory measures, the following ramifications may result:
China's GDP growth is expected to slow down by at most 0.5% in the next year and a half, according to the International Monetary Fund estimation, although it will not result in a major shock to the economy.
Apart from putting pressure on the depreciation of the RMB exchange rate, the trade friction has precipitated the fall of domestic stock market.
It has also hurt investor confidence, affected consumer purchasing behaviour, and heightened urge for safeguarding against financial risks.
For Chinese local enterprises, the “ZTE incident” is a wake-up call to re-examine and step up their compliance practices. Enterprises previously relying on the US market need to develop capabilities in other regions/countries to diversify market risks.
In the medium and long term, companies that heavily rely on US-imported core technologies need to consider alternative solutions while strengthening their own capabilities in research and development.
This report explores the chain of events leading to and rationale behind the China-US trade conflict. It also analyses potential effects on related industries and offers recommendations for Chinese companies and investors to prepare for the challenges and risks ahead.
China Central Markets Leader and China and Hong Kong Entrepreneurial and Private Business Co-Leader, PwC China
Tel: + (21) 2323 3029
G. Bin Zhao
Senior Economist, PwC China
Tel: + (21) 2323 3681