Taps Coogan – June 8th, 2020

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Tony Nash, China expert and founder of Complete Intelligence, recently spoke with Wall Street for Main Street’s Jason Burack about his outlook for the Chinese economy. He warns that disappointing export figures, overproduction and stockpiling of commodities and manufactured goods, and a weak job and wage recovery point to the risk of deflation in China. In light of that gloomy economic outlook, he believes China’s increasingly assertive geopolitical stance is aimed at distracting attention away from China’s economy.

Some excerpts from Tony Nash:

With respect to Hong Kong:

“I think the US was really smart to take away Hong Kong’s status very very quickly. The incentive was that Hong Kong would continue to be this buffer zone and that China would continue to benefit from the buffer zone… In it’s heyday, which is not that long ago, …Hong Kong was the freest market in the world… China is looking for reasons to distract from its economy, which is extremely dangerous… Anything to distract, whether it’s incursions into India, or whether it’s the South China Sea, or whether it’s Hong Kong… They’re doing anything they can to distract from their own domestic economy…”

With respect to the US-China ‘Phase One Trade Deal’:

“I think China is very good at negotiating agreements and very bad at going through with them… This is why the Americans were very focused on the enforcement mechanism within the trade agreement… With Hong Kong coming into the picture, …I think its going to be harder and harder for the agreement terms to be exercised.”

“Some of the (Chinese) state owned buyers have started to look at (US) soybeans and other products more recently but I am just not sure that that’s real…”

On India’s potential to benefit from US-China trade tensions:

“I love India. I really wish India would benefit from this, but I think there is so much corruption in India. I think it will be a very very difficult thing for any manufacturer to make a significant commitment to India… I would love for… manufacturers to move to India, but I think the reality is that from bureaucratic, from a corruption, from a just shear logistical difficultly position…, I just don’t see that happening. I wish it would but I just don’t see that happening…”

With economies around the world reeling from Covid induced economic contraction and with China facing a gloomy long term economic outlook and worsening demographics, if India is unable to fill China’s growth engine role, one has to wonder what the long term global growth story is at this point.

There is much more to the interview, so enjoy it in full above.

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