Marie Diron, a Singapore based Managing Director at Moody's Investors Service , said that trade disputes between the United States and China would have a negative effect on not only global investment but also on some trade-dependent economies.
Diron expressed her viewpoints in a recent exclusive interview with China Fortune Media, a financial portal under Xinhua News Agency.
"The impact of individual measures, such as the additional tariff by the US on USD 50 billion of Chinese imports, would be limited. We estimate the immediate impact (of these measures) on China's GDP growth will be around 0.15%. That's relatively small impact, and not something leading to our change of growth forecast for China or its credit profile. " she said.
However, the analyst believes the ongoing uncertainty on the China-US dispute will have negative impact on global investments when it delays investment decision processes or undermines confidence for investments. This would be more critical for trade dependent economies.
Meanwhile, she said that the technology transfer negotiations would have an impact on the vision of Made in China 2025, negative in the short term. But in the long run, China is not likely to be derailed from its national goal to climb up the value chain and become a high-tech economy.
"In the short term, some companies in the high tech area will face some difficulties because China is reliant on imports of goods and services, in particular in IT and electronic sectors," Diron said.
Over time though, Chinese government is determined and capable to use its financial means to invest in innovation and research and development, given China's investment is largely guided and supported by the government. As such, trade disputes are unlikely to result in a fundamental change to China's long-term plan toward its vision of a technology-led economy, according to Diron.
Regarding Asia, China has become important trading partner with many Asian economies supported by China's massive consumption demand. More importantly, the region continues to rely on exports to generate economic growth.
"We have seen that Asia is becoming increasingly reliant on trade with China. Asia total exports to China reached one trillion dollars in 2017. That is as much as the exports from the U.S. and European Union combined. It is very significant, about 6-7 percent of the region's GDP," she noted.
"Some economies like Vietnam, Korea, and Malaysia, are all reliant on trades to support their growth. So in what we would see as a downside scenario at the moment, if there would be significant interruptions in China because of some changes in the trade and technology transfer environment, that would have some spill-over effects on the Asian economies" she added.
Moody's forecasts that China's GDP growth will be at 6.6 percent this year and 6.4 percent next year, which means a continuation of a gradual slowdown in the Chinese economy.
