Trump presidential victory increases uncertainty also in China

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/45

Even with an election outcome that largely defied opinion polls, initial market reactions in China and globally suggest a wait-and-see approach to the coming Trump presidency. After Trump’s electoral triumph, the offshore yuan-dollar exchange rate in Hong Kong (CNH) fell by 0.5 % on Wednesday (Nov. 9) and the onshore rate in mainland China (CNY) remained roughly at the previous day’s level. After Wednesday, both exchange rates have weakened a bit. Interest rates remained fairly stable and changes in stock markets were moderate.

 Donald J. Trump and his administration will assume office on January 20, 2017. Thereafter, the extent to which Trump acts on his campaign rhetoric should gradually become evident. For example, Trump talked against free trade in Asia and criticized arrangements with China, even if the US and American firms have huge stakes in the region, the engine of global growth. An immediate issue for the incoming administration will be the fate of the already-signed Trans-Pacific Partnership (TPP) agreement. A collapse of the yet-to-be-ratified TPP agreement could have unpredictable effects on development of global trade and international trade rules.

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