Standard Chartered Global Co-Head of Financial Institutions Coverage Jerry Zhang sat down with the Business Daily on the backdrop of US tariffs and the subsequent pauses on the levies, to assess the implications of the pronouncements on global trade and emerging markets such as Kenya.
She offers insights on attaining resilience in a volatile environment based on her experience covering Asian markets including Japan and China.
What do you see as the implications of the US tariff pronouncement to emerging markets?
China and the US have reached a new agreement, and we have seen them come to the table trying to find a solution.
Global trade is not something that can disappear overnight. It may change its format and flows or some of the corridors, some may weaken, and others strengthen.
In general, the globalisation of trade will not stop, that’s our baseline. In the short term, the tariffs will have a bearing on emerging markets but often as we see risks, we also see opportunities depending on how each market positions itself.
People are looking at more diversification in terms of export destinations for instance. These are proactive actions to be taken over the long-term to make their global trade more resilient.
There are indications pointing towards de-escalation and we have seen talks between the US and countries like China and the UK, will this end the uncertainties we’ve seen across markets?
The market reaction we have seen so far is a counter-measure of how to deal with risk/volatility and making their portfolios more resilient. Emerging markets should however focus on the business and investment environment that they are creating to be able to catch inflows as we see reallocations across markets.
Do you get the sense that emerging markets have been hit with the dilemma of choosing the US or China as a trade war emerges?
The short answer is we have to have both. If China and the US can shake hands, there is no reason why other countries should take sides. It will be to the benefits of countries like Kenya to have integration/trade with both superpowers as they offer different things.
From a US perspective, they are offering the latest cutting-edge technology, this is their strength that you don’t have an abundant supply elsewhere. From China, you get infrastructure, manufacturing power and EVs- again this is unique. They are different but complementary.
As we see the US and China shake hands and try to find a solution, should we as Kenya push to do the same?
Why not? I think from an African perspective, market access through the Agoa pact is good for the medium to long-term. Anything benefiting Kenya and the continent, we should maximise the opportunity and not take sides.
Most are familiar with the US trade policy which borrows a lot from President Donald Trump's 'America first’ stance, based on your experience in China, is there a way to describe the Chinese trade policy?
China is increasingly stressing on the demand side, how to boost up the domestic market demand so that China cannot only produce and export but at the same time encourage imports.
That’s very much an inclusive trading policy for the global marketplace. China is also moving up the value chain by migrating more value-add manufacturing outside but raising the value of exports by embarking more into spaces such as auto exports which is a more high-tech space.
This is good for the world because China has made EVs more affordable. Having decently priced EVs from China is beneficial for countries that are keen on climate change mitigation and sustainability.
China enjoys probably the largest trading surplus with markets like Kenya, as we look to diversify our export destinations, how can we take advantage of China’s push to lift its demand/consumption to at least close this gap in the balance of trade?
Kenya has to understand its comparative strengths in terms of supply versus China’s own production. For instance, China imports a lot of agricultural products and agriculture is certainly one of the main strengths for African countries.
One thing to think of is how to fill that gap by exporting high quality and well processed agricultural products.
We have to think of trade from a value addition perspective not just as a political agenda. Political agendas can work in the short but not the long-term. The long-term has to be driven and sustained by commercial interests.
Kenya must actively participate in platforms that can showcase strengths and unique value-added products which will attract local Chinese consumers.
There is a huge middle-class population that can be tapped into as China moves to drive domestic demand/consumption.
