The Dollar Dictates China’s Need for a Trade Deal
The country's exploding foreign debt means it has to keep hard currency coming in.
The real power broker in this dispute.
Photographer: Xaume Olleros/Bloomberg
Don’t be surprised that China is sending its trade negotiators to Washington after all, having threatened to call off this week’s talks in response to President Donald Trump’s tariff threats. There’s one big, and perhaps overlooked, reason why Beijing must continue to pursue a deal with the U.S.: its critical need for dollars.
Consider how conditions have changed for China since officials sought to hammer out an accord a year ago. In May 2018, the economy was strong and Beijing saw little reason to yield to the Trump administration’s bellicose rhetoric. Nominal gross domestic product grew more than 10% in the first quarter of 2018 and hit 9.8% in the second. One year on, China’s economy is weaker and its need for hard currency has become more acute as external debt piles up.