US-China political tension is major concern for investors: Economist


China’s President Xi Jinping and U.S. President Donald Trump attend a welcome ceremony at the Great Hall of the People in Beijing on November 9, 2017.

Nicholas Asfouri | AFP | Getty Images

The coronavirus pandemic might have peaked, but the political fallout from it is just picking up pace and investors are getting very worried, said an economist on ednesday.

“The virus situation (has) already peaked,” according to Zhiwei Zhang, president and chief economist of Pinpoint Asset Management. “On the margin, it’s gradually improving. There are always concerns about a second wave (but) as long as the general public as well as the governments are aware of that risk, the risk is contained to some extent,” he told CNBC on Wednesday.

However, political risks and U.S.-China trade tensions “look like something that will pick up,” Zhang said. “That’s probably the number one concern in the market when we talk to investors and sell-side analysts.”

Zhang pointed out that these tensions are likely only in their early stages.

It comes just six months before the U.S. presidential election, and amid signs that U.S. officials may be ratcheting up pressure on Beijing, he said. “We already started to see some signs of escalation over the last few days (with) the U.S. side pointing fingers to China,” Zhang added.

These tensions will hit the currency market and the Chinese yuan could weaken in volatile trade, he said.

Zhang said the market is very concerned about the current U.S.-China dispute over the origins of the virus, which was first reported from the Chinese city of Wuhan.

U.S. President Donald Trump said he believes that China’s “mistake” caused the global pandemic. Secretary of State Mike Pompeo also said “a significant amount of evidence” suggests that the virus originated in a laboratory in Wuhan.

China has rejected many of those claims.

Critics also said Beijing wasn’t upfront about the dangers of the virus in the early stages of the outbreak, and criticized the government for being too slow to respond and under-reporting the extent of the epidemic within its borders.

Tensions between the U.S. and China have intensified in recent weeks as the coronavirus rips through the U.S. — which has the most number of reported cases and deaths — and sent the world’s largest economy to a standstill.

The U.S. and China had signed the so-called “phase-one” trade deal in January, just as the outbreak began to take hold in China’s Hubei province where the virus first emerged. The world’s two largest economies spent the last two years in a trade war that dragged down the global economy, and saw both countries impose significant amounts of additional tariffs on each other’s products.

A former White House trade negotiator Clete Willems told CNBC on Tuesday: “This is the start of a new Cold War and if we’re not careful, things could get much, much worse.”



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