Morgan Stanley’s Stephen Roach is on CNBC this morning, talking China.
He’s not sanguine about the prospects of averting a trade war.
The House has already passed a bill, and he thinks there’s a real possibility that the Senate will follow along (contra conventional wisdom that the Senate won’t act).
And if that passes? Obama doesn’t have the political capital to vet.
As for the whole yuan issue: he notes that the currency is up 23% in five years, and that five years ago experts were calling for a 25% hike, so they’re basically there. And beyond that, the Chinese leaders know they need to stimulate domestic demand in order to counteract weak demand in the West and in Japan.
What’s more, the government will introduce a social safety net that will drive consumption soon.
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