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China could develop systems separate from the world: Expert

A delivery driver wearing a face mask drives an electric bicycle down a street in Beijing’s central business district on July 16, 2020.

Wang Zhao | AFP | Getty Images

SINGAPORE – The cost of a US-China “decoupling” would be high, but that doesn’t mean Beijing won’t choose to create systems that are “mutually exclusive”

; from the rest of the world, an expert told CNBC this week.

“There is a real danger that China and … much of the rest of the world will develop separate financial systems for things like international debt payments and trade payments,” said Robert Daly, director of Wilson Center’s Kissinger Institute. on China and the United States.

China could also develop different technological systems, he told CNBC’s “Street Signs Asia” Wednesday. “If that happens, if you have financial, economic, technological and digital systems that are mutually exclusive, then you will really be talking about decoupling and China will go its own way to a considerable extent.”

This can happen even if Beijing knows that the cost of decoupling would be high for China, the United States and the rest of the world. China does not welcome decoupling, but it will not “back down from it,” he said.

Daly said US President Donald Trump has made “extreme and maximalist threats” during his tenure, but usually “retires” after considering the consequences.

“There are some people in the White House who would like to technologically separate from China and would not like to provide it with any chips that could help build China’s global power,” Daly said. “But they don’t want to bankrupt Qualcomm, they don’t want to harm American farmers who have already been subsidized by US taxpayers in the amount of over $ 28 billion due to the trade war.”

‘Deep mistrust’

However, he describes decoupling as “more than just campaign rhetoric” from the Trump administration.

“I think it has that feature,” he said. “It’s a ploy to convince American voters that he, President Trump, is trying to protect them and he’s harder on China than Biden (Democratic presidential candidate).”

According to Reuters, Trump told supporters at a rally Tuesday that “Joe Biden’s agenda is made in China”, while his “agenda is made in the United States”. He also called Biden a “globalist sell-off”.

But beyond politics, “there is indeed a deep distrust of being too closely aligned” with China, especially when it comes to rare earths, medical or pharmaceutical technology and equipment, he said. At least partial decoupling in some of these sectors is a “very real” possibility.

Americans want to be more self-sufficient and certainly not tied to China, he added.

“That desire is real, it is enduring and will continue in some way, even under a Biden president if we have one.”

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