Despite a temporary de-escalation of hostilities following the G-20 summit, the relationship between the US and China will remain contentious, says Moody’s Investors Service in a new report.
Narrow agreements and modest concessions in the ongoing trade dispute will not bridge the wide gulf in their respective economic, political and strategic interests.
At the G-20 meetings that concluded on December 1, the US and China agreed to continue trade negotiations, during which the US will suspend for 90 days the planned increase in tariffs targeted for January 2019, and China will increase imports from the US.
Despite this temporary de-escalation of hostilities, Moody’s expect the relationship between the world’s two
largest economies to remain contentious.
“The US and China have differences that are deep and multi-faceted, leading to diverging national and commercial interests,” says Moody’s Managing Director Atsi Sheth. “As China increases its influence in global economics and politics and the US retrenches its international engagement, the relationship between the two powers has entered a new, tense and uncertain phase.”
Differences in strategic objectives between the two will affect credit conditions in four key areas: Trade, technology, investment and geopolitics.
Neither country is likely to cede its key national priorities to defuse tensions. However, an economic cold war that leads to decoupling would be costly for both the US and China.
The rating agency says relations between the two countries will swing between conflict and compromise.
The impact of US-China tensions on credit conditions will be felt at the global, country, sector and company level. A worsening of tensions would disrupt global trade, erode the effectiveness of the international multilateral trade regime and dampen growth. Financial market volatility will affect valuations and borrowing costs for many debt issuers.
BOT relaxes rules to Curb Strong Baht
the Bank of Thailand (BOT) decided to relax regulations to facilitate capital outflows to help promote capital flow balance and lessen pressure on the baht.
The Thai baht has been under pressure due to imbalanced capital flows in the current environment of highly uncertain and volatile external conditions, the Ministry of Finance (MOF) and the Bank of Thailand (BOT) decided to relax regulations to facilitate capital outflows to help promote capital flow balance and lessen pressure on the baht.(more…)
Bank of Thailand cuts rate by 0.25% to 1.25 per cent
The latest cut brings the Bot’s policy rate to an historical low, which the bank maintained from April 2009 to July 2010 during the subprime global financial crisis.
On 6 November 2019, the MPC voted 5 to 2 to reduce the policy rate by 0.25 percentage point from 1.50 to 1.25 percent, effective immediately. Two members voted to maintain the policy rate at 1.50 percent.(more…)
Thailand’s loss of trade privileges with US is credit negative
The development is credit negative because Thailand’s export-oriented economy is in a difficult external environment given that a broad-based export slowdown and strong Thai baht are weakening the competitiveness of goods exporters and the country’s tourism industry.
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