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Decoupling America would cut China's annual growth to 3.5pc

WORSENING conflict between China and the US has damaged trade, but a complete decoupling between the two would be more damaging to China's long-term growth, reports Bloomberg

08 September 2020 - 19:00

WORSENING conflict between China and the US has damaged trade, but a complete decoupling between the two would be more damaging to China's long-term growth, reports Bloomberg.

The country's potential growth rate could fall to about 3.5 per cent in 2030 if it decouples with the US, Bloomberg Economists Tom Orlik and Bjorn van Roye wrote in a note. That's down from the current forecast of 4.5 per cent, which assumes relations remain broadly unchanged. The US potential growth rate would be 1.4 per cent in 2030 instead of the current forecast of 1.6 per cent, the research estimates.



In this scenario, China's productivity growth will slow due to the stop in technology transfer, and capital spending could also be weaker.



But results won't be catastrophic as the country has substantially narrowed its technology gap with advanced economies over the last 20 years, the study argued.



'If China moved to increase domestic funding for research and development, and expanded its ties with other advanced economies, it could hope to offset a significant amount of the drag,' the economists wrote.


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