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Biden victory to boost Asia but China tensions to remain


With US presidential elections nearing, experts say the benefits for Asia and emerging markets of a change in leadership are many – as are the challenges. But whoever wins US/China tensions are likely to remain on the boil.

US presidential candidate Joe Biden’s rising lead in the polls is being seen a positive signal for Asian economies outside China that would benefit from a new face in the White House.

Market watchers in Asia are taking stock of the possible ramifications to growth and their economies. According to Shaun Roache, Asia Pacific chief economist at S&P Global Ratings, there can be some good news coming the way of countries in the region.

He predicts a Biden win will bring big capital inflows into Asia, a demand pick-up and easing of financial conditions — all of which will be much needed.

“I think it provides a big tailwind, particularly at a time when a lot of relief measures that we’ve seen [due to Covid] are going to start tapering, which is when you need some external push to help the economy,” said Roache “And at the moment, it looks as though… we might get that from the US.”

Steven Cochrane, chief economist for Asia Pacific at Moody’s Analytics, added that Biden was likely to “re-engage” with the World Trade Organisation or maybe even join the Trans-Pacific Partnership.

However, China is unlikely to share in the change of fortunes. “No matter who wins the election, US-China trade and economic relations are expected to remain tense given the degree of bipartisan consensus on [key] issues in the US,” said Stephen Schwartz, head of Asia Pacific sovereign ratings at Fitch.

“That said, the Trump administration has been marked by a high degree of policy uncertainty, just by the very nature of how policies have been carried out internationally. Biden might adopt a more predictable and multilateral approach to international issues, which, from the perspective of policymakers in Asia, may be helpful.”

China remains in crosshairs

The latest figures on trade between the US and China could deal a blow to Trump with the US heading for elections on November 3, given one of his key priorities has been taking down China a peg on trade matters.

China’s customs department revealed this week that while its imports from the US jumped nearly 25% last month to $13.2bn — the highest monthly import since mid-2018 — so did exports to the US. Exports soared about 20% to $43.96bn, meaning the country’s trade surplus with the US is still nearly 19% higher than a year ago.

Cochrane said: “The trade war is likely to last for the next few years no matter who wins the election. They will go about it in different ways. And there is a good chance tariffs would ultimately fall under Biden.”

John Sitilides, a geopolitical strategist at Trilogy Advisors in Washington DC, said that US trade policy would “continue to constrain China’s aggressive technology moves, especially in the 5G and semiconductors industries”.

A Biden win could prove advantageous for emerging markets overall — albeit with some small caveats. Petar Atanasov, co-head of sovereign research at EM-focused investment manager Gramercy, reckons a Biden victory with a Democratic senate would likely be the “best result” for EM, as it could be positive for globalisation and mutual policymaking.

But he added that if there is a split government, the “potential for policy gridlock is high”. “If Biden wins and pushes the green agenda strongly, there is a possibility Mexico and Brazil would feel slightly isolated — especially Brazil as [President Jair] Bolsonaro and Trump have a strong relationship,” he added.

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