For years, the U.S. foreign policy has been critical to Asia’s economic and financial markets. As the 2020 presidential election has entered a new phase, where Joe Biden neared victory in the presidential election, the focus among America’s friends and rivals across the world tend to predict what a Democratic administration would mean for their engagement with the United States. Among the analyses, the influence that the U.S. election has on Asian economies has further revealed.

Section 1: How will China be influenced by Joe Biden’s victory?

After former Vice President Biden wins the presidential election, the Asia-Pacific region he faces will be very different from the one during Obama’s presidency. Due to the ongoing decoupling of trade and technology, the relationship between the two largest economies in the world has been reshaped. After Biden takes office, he will inherit the first phase of the trade agreement and decide how it should be proceeded. He will also have to deal with a basket of tariff measures and the consequence of the U.S’s withdrawal from the Trans-Pacific Partnership. It is expected that Biden will be committed to rebuilding alliances and adopting a multilateral approach, which may help stabilize the deteriorating relations between the two countries, though the trend of increasing competition is likely to continue.

Short-term policies

For the Biden administration, the priority may be solving urgent domestic issues, including the Coronavirus pandemic, high unemployment rate, fiscal issues. Many expect higher financial expenditure during Biden’s presidency, with more Covid-19 aid plans passed and massive support provided for economic recovery. One of the largest consumers in the global trading system, a healthy American is the key driver in the growth of Asian economies and overall global growth. Moreover, as Biden has repeatedly emphasized, the investment in domestic healthcare, renewable energy, and infrastructure will increase, which is likely to stimulate companies and industries on a global scale.

Long-term policies

Seeing the big picture, 2 major policies may be enacted and promoted.

1. A multilateral approach will be adopted to exert further pressure on China. Greater multilateral cooperation can lead to more moderate policies, implying that negotiations on issues of market access, intellectual property rights, and bilateral investment may be more effective on the U.S. end. 2. The policymaking process will return to a more traditional and more transparent model. Over the past four years, tensions on bilateral trade, cross-border capital flows, and technological interdependence have escalated. The Biden administration may adopt a more cautious approach, which can reduce uncertainty and volatility.

However, it should be noted that some policies may remain unchanged. No matter who wins the election, a public opinion held by the two major parties of confronting China has formed, which will affect the future president’s plans. Many of the driving factors leading to the technological competition between China and the United States have already existed and will continue in the future, which mainly includes the concern about the Chinese dominance in the TMT sector and the need of the U.S. for domestic infrastructures. In addition, Congress has played a tougher role in enacting foreign policies in recent years, and their priority is likely to remain the same.

Admittedly, one can expect the change in more specific policies. The export restrictions list may be reconsidered to better reflect the commercial costs and interests of American companies. Although the United States is unlikely to cut tariffs without concessions of China, the Biden government may be reluctant to use tariff measures, at least not unilaterally.

Section 2: What does this mean for investors?

With Biden elected as president, greater financial support will have a positive impetus on the U.S. and global economy. At the same time, a more stable relationship between China and the United States, even if it is still highly competitive, can be established, which will be beneficial to the market. One should be optimistic about the Chinese assets, and it should be expected that their value will be further strengthened with reduced confrontation on trade issues and a more predictable foreign policy. This may be a catalyst for emerging markets in Asia, where trade-oriented economies in China’s supply chain, such as South Korea and Japan, can benefit from stronger trading activities. The rest of Asia will also benefit from stronger global economic growth, a weaker U.S. dollar, and more positive investor sentiment.

Sources:

https://www.sohu.com/a/410996872_481793
https://privatebank.jpmorgan.com/gl/zh-cn/insights/investing/what-do-the-us-elections-mean-for-asia