Trade war escalation may trigger financial crisis in China, researchers warn
Study looked at possible scenarios where the US could try to constrain, or even attempt to destroy, China’s financial markets, financial assets and its currency
A further escalation of the trade war between Washington and Beijing to include sanctions on financial products or transactions could trigger a financial crisis in China, researchers warned in a report.
The study – released on Saturday by Renmin University’s National Academy of Development and Strategy – looked at a series of possible additional retaliatory steps the US could take in the trade war to constrain, or even try to directly destroy, China’s financial markets, financial assets and its currency.
While some of the scenarios seem fanciful, and would clearly do the world economy great harm if they were ever implemented, the fact that the think tank chose to examine them suggests concern that the US will stop at nothing to win the trade conflict.
So far, the tit-for-tat trade war between the world’s two largest economies has focused entirely on commercial goods, with both sides having levied 25 per cent tariffs on US$50 billion worth of each other’s imports in July and August. The trade war intensified on Monday after Washington imposed a 10 per cent tariff on US$200 billion worth of Chinese imports, with the tariff rate set to rise to 25 per cent on January 1 next year if China does not make trade concessions. China promised to retaliate with tariffs on US$60 billion worth of US goods.
