{"id":148042,"date":"2019-05-20T11:15:14","date_gmt":"2019-05-20T15:15:14","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=148042"},"modified":"2019-05-20T08:34:51","modified_gmt":"2019-05-20T12:34:51","slug":"chinas-looming-current-account-deficit-will-have-consequences-for-us-all","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/05\/chinas-looming-current-account-deficit-will-have-consequences-for-us-all\/","title":{"rendered":"China\u2019s looming current account deficit will have consequences for us all"},"content":{"rendered":"
May 20, 2019<\/div>
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By George Prior<\/strong><\/p>\n

Investors need to mitigate the risks of China\u2019s looming current account deficit, coming at a time of ballooning U.S. budget deficits.<\/p>\n

This is the warning from a Senior International Investment Strategist at one of the world\u2019s largest independent financial advisory organizations.<\/p>\n

The stark observation from deVere Group\u2019s Tom Elliott comes as the escalating trade war between the U.S. and China \u2013 the world\u2019s two largest economies\u00a0 -threatens to curb Chinese exports, accelerating the Asian powerhouse’s lurch towards a current account deficit.<\/p>\n

He explains: \u201cChina has spent the last two decades turning its trade surplus into purchases of overseas assets, from U.S. Treasuries to London property.<\/p>\n

\u201cBut China is changing. Its current account is about to turn negative, meaning its economy will be increasingly dependent on foreign capital to continue growing. This has potentially far-reaching implications, not just for China, but for the U.S. and the rest of the world. The 25% tariff imposed by the U.S. on $500 bn worth of Chinese imports will accelerate this trend.<\/p>

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He continues: \u201cAs China stops being a large buyer of U.S. Treasuries, America\u2019s budget deficit is ballooning and will be just short of $1 trillion this fiscal year. The combination is negative for U.S. Treasuries, and may help drive up U.S. and global bond yields.<\/p>\n

\u201cInvestors around the world may see higher global borrowing rates, from car loans to mortgages, because of the end of the Chinese savings glut.<\/p>\n

\u201cThis could trigger a global economic downturn.\u201d<\/p>\n

\u201cThe two main drivers of this change both reflect the fact that China has become wealthier, and that a growing middle class has cash to spend.<\/p>\n

\u201cFirst, the growth in the export of goods has not kept pace with the growth of consumer imports. China\u2019s deficit in traded goods with Japan and South Korea has grown.<\/p>\n

\u201cSecond, a huge increase in Chinese tourism abroad has occurred over the last decade which has increased the persistent deficit in services. In 2018, Chinese visitors spent $240 billion more abroad than foreign visitors spent in China, thanks in part to their lavish spending habits. In 2017 Harrods, the London department store, reported that mainland Chinese overtook British customers as the largest customer group.<\/p>\n

\u201cDomestically, the Chinese authorities have responded to the change in the current account by opening China\u2019s capital markets to foreign investors, to help boost inflows of foreign capital.\u201d<\/p>\n

deVere\u2019s International Investment Strategist concludes: \u201cChina\u2019s – and therefore the world\u2019s \u2013 economy is changing.<\/p>\n

\u201cBut remember, wherever there is disruption there will be winners.<\/p>\n

\u201cAs such, investors should remain diversified, geographically and by asset class \u00a0– that\u2019s to say, maintaining exposure to equities and bonds, from as many different issuers as possible – in order to protect their savings from this uncertainty and capitalise on the opportunities that will inevitably present themselves.\u201d<\/p>\n

About:<\/strong> <\/em><\/p>\n

deVere Group is one of the world\u2019s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.\u00a0 It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.<\/p>\n","protected":false},"excerpt":{"rendered":"

By George Prior Investors need to mitigate the risks of China\u2019s looming current account deficit, coming at a time of ballooning U.S. budget deficits. This is the warning from a Senior International Investment Strategist at one of the world\u2019s largest independent financial advisory organizations. The stark observation from deVere Group\u2019s Tom Elliott comes as the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-148042","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/148042","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=148042"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/148042\/revisions"}],"predecessor-version":[{"id":148043,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/148042\/revisions\/148043"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=148042"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=148042"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=148042"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}