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Trump 2.0 Tops Chinese Investors’ Concerns, Goldman Sachs Says

(Bloomberg) -- On top of tumbling stocks, an embattled property market and a struggling economy, there’s at least one more thing keeping domestic Chinese investors up at night: a potential win by former US president Donald Trump in the November general election.

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That’s one of the findings by Goldman Sachs Group Inc. after talking with its onshore clients — which include mutual funds, private equity funds and asset managers at insurance firms — in Beijing and Shanghai over the past week.

“The most frequently asked questions among local investors include implications for China should Donald Trump become the next US president,” the Wall Street bank’s economists led by Maggie Wei and Hui Shan wrote in a note Friday.

Their concerns didn’t come out of nowhere. Trump is weighing options for a major new economic attack on China if reelected, the Washington Post reported on Jan. 27. The Republican frontrunner has endorsed revoking China’s “most favored nation” status for US trade, a move that could lead to federal tariffs on Chinese imports of more than 40%, according to the Post.

Trump has discussed with advisers the possibility of imposing a flat 60% tariff on all Chinese imports, the Post reported. On Sunday, he told Fox News “maybe it’s going to be more than that.”

David Firestein, president and chief executive officer at the George H. W. Bush Foundation for US-China Relations, doesn’t expect the US election to have much impact on ties between the two countries.

“Whoever wins the 2024 presidential election, whether that’s Biden or Trump, I don’t think there’ll be a difference in the way the US approaches China — whether it’s US investment, technology transfer or trade,” the former American diplomat said. “The political climate in the United States in terms of China is going to be very similar to what it has been over these last eight or nine years, irrespective of whether Biden or Trump wins. When Biden came in, he essentially not only embraced Trump’s policies, but indeed largely doubled down on them.”

At the same time, he said he “can also see why China would be very pleased with the prospect of a Trump victory in 2024.” As for Trump implementing new tariffs, “how seriously to take Trump’s proposal is a question mark,” he said.

Stocks tumbled last week as a sense of panic gripped Chinese investors on Friday. Traders couldn’t pinpoint any fresh impetus behind the moves but cited concerns about forced sales by leveraged shareholders as among the reasons for the sudden acceleration of losses. The onshore benchmark CSI 300 Index ended the period down 4.6%, its biggest drop since 2022, while the Shanghai Composite Index lost 6.2% in its worst week since 2018.

Read more: China Stocks Swing Wildly in Chaotic End to Worst Week in Years

Local investors looking forward to China’s economic prospects for 2024 didn’t offer much solace. When asked by Goldman to rate their outlook for the year using a scale from zero to 10 — where zero was equal to the difficult 2022 Covid lockdown period and 10 to the first quarter of 2023 when China reopened and the last positive quarter for its equities market — half of the 12 local investors who answered said zero. The rest of the investors gave an average score of 3.

Other than Trump, local Chinese investors also wanted to learn what would trigger more aggressive policy easing in Beijing, and offshore investors’ views about Chinese stocks after the persistent selloff, according to Goldman.

In comparison, offshore investors’ concerns centered on economic fundamentals, including whether the property market has bottomed, and how policymakers can fight deflation.

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