Market is 'completely ignoring' serious risks associated with U.S.-China relations, Asia expert Stephen Roach warns

3 weeks ago 25

There's a important hazard catching economist Stephen Roach's attention, and it has thing to bash with net season.

Roach, 1 of the world's starring authorities connected Asia, is acrophobic U.S.-China relations could erode further successful the coming weeks.

"There are a batch of balls successful the aerial close present that are precise worrisome," the erstwhile Morgan Stanley Asia president told CNBC's "Trading Nation" connected Wednesday. "You've got a existent occupation here, and it's 1 that worries maine a lot, and I deliberation the markets are wholly ignoring."

Roach sees bipartisan successful the Senate for the Strategic Competition Act of 2021 arsenic a troubling development. His reason: it reflects a hard-line attack against China that could spark retaliation.

"My fearfulness for the past respective years is that what started retired arsenic commercialized warfare would crook into a tech war, and past yet morph into a acold war," Roach said. "Those fears person travel to pass. Just this week, determination are important developments that pb maine to underscore that risk."

He besides lists a caller U.S. quality study arsenic peculiarly worrisome.

'The yearly menace appraisal was released yesterday [Tuesday] by the bureau of nationalist quality and it intelligibly labeled China arsenic America's No. 1 threat," said Roach, who's monitoring building tensions betwixt China and Japan, too.

According to Roach, it appears President Joe Biden volition continue galore of the Trump administration's policies against China.

Roach warns the accrued U.S.-China tensions exacerbate his dollar clang call. Late past spring, he predicted the greenback would driblet 35% against different large currencies implicit the adjacent twelvemonth oregon two.

"The dollar moved down sharply successful the 2nd fractional of 2020. It reversed people successful the archetypal 4th of this twelvemonth and present it's nether downward unit again," Roach said. "It reflects my concerns implicit the existent relationship shortage successful the United States, unwillingness of the Fed to tighten involvement rates for the conceivable future, and past the anticipation that Europe whitethorn extremity up having a stronger committedness to fiscal argumentation than immoderate of us, myself included, thought."

He's besides acrophobic the existent backdrop with China could exacerbate the danger.

"You adhd to that pressures connected America's relation arsenic a planetary person that whitethorn beryllium brought into play by frictions with China and there's still, successful my view, sizeable downside near for the U.S. dollar," Roach said.

The U.S. Dollar Currency Index is disconnected astir 1% implicit the past week. It's down much than 7% implicit the past year.