OBELA Analysis

This note seeks to analyze from a macroeconomic perspective the causes and consequences of economic dynamics and trade warfare from the aggregated gross capital formation, GDP and the Business Confidence Index.

The trade war affects the business confidence whose measurement in March 2018 expressed as BCI, index of confidence in the performance of future businesses, gave 99.5 and 101.2 for China and the U.S. respectively.

The trade war is nothing more than the product of the economy of a country that was once the world commander and that today, faced with the loss of competitive capacity, seeks to blame its main rival as it did in the 1980s with Japan.  But the difference between China and Japan is substance.

China would make changes to the ownership conditions of foreign investors in its financial sector in 2020. Beijing's signal came in the context of the U.S.-China trade war.

The objective is to internationalize Reminbi. Chinese banking has been opened to foreign investors as part of this strategy and to comply with the agreements made with the IMF.

However, the Chinese government has learned the lesson of the American war against the yen sustained between 1985 and 1990, and has implemented the necessary regulatory mechanisms to open its financial system, with the purpose of countering exchange and speculative attacks.

The commercial war waged by the U.S. against China is taking place in a scenario of technological backwardness in the areas of telecommunications, energy, electric cars, cell phones and computers against China.

The U.S. began to lose market share in the global high-tech market in the 21st century and concentrated on completing its global value chains to increase profitability. In 2018, China exported three times the value of these exports to the United States and more than ten times that of European countries.

The imperative need for the US to interfere with China's deployment is growing, and the protectionist trade route has not worked. Everything seems to indicate that the war is going to move to the exchange and financial field.