Coronavirus Impact will likely Limit China’s Phase One purchases

Two experts on the bilateral relationship between the U.S. and China said the impact of the coronavirus on the Chinese economy doesn’t bode well for the Phase One Trade Deal. They tell the South China Morning Post that COVID-19 has likely rendered the pact between the world’s two largest economies “stillborn.” The economic impact will only add to pressure on Beijing to reform its domestic economy.

The Post said China had high levels of debt before the virus outbreak, plus, the private sector struggles to regain momentum will likely put a damper on consumption. Rhodium Group founder Daniel Rosen and former Australian Prime Minister Kevin Rudd both say consumption will be limited to the point that it will be almost impossible for Beijing to fulfill its buying commitments.

“The extraordinary stimulus that got China out of the financial crisis in 2008-2009, which they were applauded for, is simply not an option today,” Rosen said. “The easy credit given to support the country’s state-owned enterprises in recent years is too high.” Rudd says the Chinese government won’t do another stimulus strategy like the last one, even though the need is much greater.”

The negative assessment runs counter to the expectations of President Trump, who says he’s confident China will follow through on its obligations. 

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