Author: Joesph Patterson

The ECB Raises its Key Interest Rates

Written by Joesph Patterson on . Posted in News & Reports. Leave a Comment

On the 10th of September 2026 and for the second time since the commencement of the United States/Iran conflict (28th February 2026), the ECB lifted its three key interest rates by 25 basis points. The central bank hiked its key benchmark deposit rate to 2.5%, whilst at the same time, they hiked the interest rates of both their Main Refinancing Operations and the Marginal Lending Facility by 25 basis points to 2.65% and 2.9% respectively. 

*ECB Interest Rates – The ECB has three interest rates; the Key Deposit Rate is the interest rate banks receive when they deposit monies overnight with the ECB. The other two facilities are the Main Refinancing Operations which is the rate the banks pay when they borrow money from the ECB for one week. Lastly, the Marginal Lending Facility is the rate banks pay when they borrow money overnight from the ECB.

Those close to the meeting of the governing council advised that there was a broad consensus among members to raise interest rates, with the President of the ECB, Christine Lagarde, being quoted as saying the latest hike was a “no brainer”, noting the increase in rates was agreed unanimously. A statement from the ECB read, “the conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period.”

Officials advised that projections showing inflation averaging 3% this year and slowing to 2.7% next year were a key driver for the general council reaching today’s decision on interest rates. Officials went on to say that, “the outlook remains highly uncertain, with risks to the upside of inflation and the downside of economic growth.” President Lagarde further warned that higher energy costs are set to feed through gradually into core and food-price inflation. 

Recently released data for last month confirmed that across the 21-country eurozone, surging oil and gas prices pushed inflation past the 3% mark, well above the ECB’s benchmark target of 2%. Officials noted that recent conflict escalations between the United States and Iran in the Middle East could have further negative effects on inflation, pointing to further price increase which could impact wage-setting. President Lagarde added that, “the war in the Middle East is weighing on activity, and surveys are pointing to a slowdown, especially in services. The increase in energy prices will lift inflation further over the summer and keep it well above target in 2027.”

Analysts advise that financial markets have significantly adjusted their expectations upward, pricing in at least two more interest rate increases by the ECB, spanning a period of late 2026 through to early 2027. The hawkish shift in sentiment by traders is due to the on-going and increasing fighting in the Middle East conflict, which has pushed the Benchmark Brent crude price back above the $100 p/bl mark (which hit the $102 p/bl earlier this week), but as of today, is trading at circa $101.69 p/bl.

Is OPEC’s Future Under Threat

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On the 28th April this year, the United Arab Emirates officially announced they were leaving OPEC and OPEC+, and formally walked away three days later on 1st May, ending a 59 year membership that began in 1967. A number of reasons for leaving OPEC include a frustration with OPEC+ production caps limiting the UAE’s output to circa 3.4 million bpd (barrels per day), leaving just under 30% of overall production offline. As a result, the UAE wanted independence from OPEC in order to maximise revenue before global oil demand begins a permanent decline. Another problem was sitting at the same table with representatives from Iran, who due to the Middle East crisis, had persistently attacked the Emirate with drones and missiles, threatening their economy.

*OPEC – Short for the Organisation of the Petroleum Exporting Nations and is a coalition of 23 oil producing countries of which the full members are: Algeria, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Republic of the Congo, Saudi Arabia, United Arab Emirates and Venezuela. 

**OPEC+ – There are a further 10 non-OPEC partner countries that form the OPEC+ and make up the DoC (Declaration of Cooperation), consisting of: Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan. The whole group’s modus operandi is to cooperate to influence the global oil market and stabilise prices.

The UAE is not the first member to resign as Indonesia left in 2016, Qatar in 2019, Ecuador in 2020 followed by Angola in 2023. At the time, experts, analysts, and oil commentators all sounded the death knell for OPEC—but it never happened. OPEC simply carried on as if nothing had occurred. However, the UAE is a different matter, being OPEC’s third largest producer and second highest spare production capacity. Indeed, OPEC lost circa 15% of its total capacity severely weakening its position and ability to adjust and set global prices. Furthermore, in late July this year, it was reported that Venezuela was considering resigning its membership from OPEC, however a final decision has yet to be made.

Coming quickly on the heels of the UAE’s decision to resign from OPEC, alongside rumblings of discontent from Iraq, this announcement leaves experts questioning whether OPEC and OPEC+, led by Saudi Arabia, can continue to hold together oil prices. A former senior oil marketing official from Oman’s Energy Ministry noted, “The critical question is whether this marks the beginning of a broader wave of withdrawals, the very cohesion and credibility of OPEC could be at stake”. Further erosion in recent years of OPEC dominance can be seen by rivals outside of OPEC and OPEC +, such as Brazil and Guayana and shale drillers in the United States. 

In volume terms, Venezuela resigning from OPEC would have little short-term impact. However, the country possesses massive oil reserves that, alongside US supermajors, could be unleashed onto the market over coming decades, with analysts noting high-level US-Venezuela discussions over 100-year leases on several oilfields. Losing Venezuela would deal a major blow to OPEC’s prestige. As a founding member back in 1960, its departure carries immense symbolic weight, with a former OPEC secretariat analyst observing, “This would be a big hit to OPEC.”

Is The US Dollar Debasement Trade Back in Earnest?

Written by Joesph Patterson on . Posted in News & Reports. Leave a Comment

A number of experts advise that the “Debasement Trade”* is back as investors unload the US dollar, due to fiscal and political uncertainty and piling into alternative assets such as gold and Bitcoin, with the cryptocurrency hitting a three month high and passing the $80,000 mark. However, a number of other experts suggest that the debasement trend is not real, and just because there has been a dip in the dollar, there is no need to expound on the debasement theory. 

*Debasement Trade – A financial strategy where investors invest in assets such as Bitcoin and gold as a hedge against the devaluation of fiat currencies, with key takeaways being rising sovereign or government debt, geopolitical instability, and inflation.

Currency commentators suggest that the reason for the latest fall in the US dollar started with interventions in the currency markets to support the Japanese Yen, as instigated by the US Treasury Secretary Scott Bessent. Scott Bessent then tried, unsuccessfully, to rein in long-term borrowing costs by announcing further plans to buy back long-term government bonds and issue shorter term treasuries. These two steps taken by the Treasury Secretary have revived talks of debasement, despite the fact that he maintains that the White House through the Treasury still has a strong US dollar policy.

However, government debt has now gone roaring past the $40 trillion mark, and with yields on treasuries elevated, the sustainability of such debt is becoming harder with analysts suggesting that this will weigh on growth and devalue the US dollar. Some well-known experts have encouraged investors to sell the dollar and buy gold and Bitcoin, driven by market speculation (despite claims to the contrary) that both the President and the Treasury Secretary are comfortable with a weaker dollar.

One problem for the White House is that come November, the upcoming mid-term elections are just around the corner, and with mortgage rates still rising and gasoline prices still high at the pumps, commentators suggest that the bond buy-backs, hopefully lowering long-term yields, may well be politically motivated. The problem, suggest some analysts, is that by pushing this programme too hard it may reignite inflation, forcing the Federal Reserve to hike interest rates, which is exactly what the White House does not want. 

On the flip side of the debasement argument, some analysts point out that the debasement trade is flawed and there is not enough evidence to support this theory. Indeed, they note that there is no global selling of US dollar denominated assets as global investors continue to hold sizable amounts of US Treasuries. They also note the current strength of the US stock market as a nod to their anti-debasement theories, as overseas investors need to purchase dollars in order to buy US stocks and shares. 

However, looking forward, many experts agree that enthusiasm for the debasement trade may prove to be short-lived. The recent moves within the gold, Bitcoin and the US dollar markets may start to substantially cool as no one can see where the next catalyst for these moves will be coming from. Analysts point out that the buy-back schemes initiated by Secretary Bessent are on the small side in relation to the Treasury market itself. On the cryptocurrency front, Spot Bitcoin ETFs (Exchange Traded Funds) have recently had their strongest inflow for ten months, but will this continue if the debasement debate goes away? 

Beyond the Banks: Your Guide to Securing High-Value Private Credit

Written by Joesph Patterson on . Posted in News & Reports. Leave a Comment

Securing Debt Financing for multi-million-pound Capital Projects—such as infrastructure development, major acquisitions, or large-scale corporate expansion—often exceeds the risk appetite or structural flexibility of traditional commercial banks alone.

For executives leading these high-value projects, the key to successful Capital Raising often lies beyond traditional banking, in gaining access to the exclusive world of Private Credit and Institutional Investors.

The Rise of Private Credit

Private Credit refers to debt financing provided by non-bank financial entities, such as specialised private debt funds, asset managers, pension funds, and insurance companies. This market has exploded as Institutional Investors seek higher yields and customised loan terms unavailable in public markets.

For complex Capital Projects, Private Credit offers distinct advantages over conventional bank loans:

  • Customisation: Terms, repayment schedules, and covenants are tailored directly to the project’s unique cash flow and structure.
  • Scale: Institutional Investors are prepared to fund large, illiquid transactions that banks might pass on.
  • Flexibility: Private lenders are often more focused on the long-term project viability and the quality of the security package than on short-term corporate liquidity metrics.

Three Paths to Finding Institutional Investors

Finding the right Private Credit fund that matches your project’s geography, industry, and risk profile is a specialised challenge.

1. Direct Outreach (Challenging)

Attempting to connect directly with Institutional Investors—such as sovereign wealth funds or major pension funds—is often challenging and time-consuming, with low conversion unless you have an established relationship. These organisations rely on highly vetted pipelines and typically screen out unsolicited proposals.

2. Generalist Advisors (Slow & Costly)

Using non-specialised investment bankers or corporate finance advisors can be slow. While they provide access to Private Credit, their approach is often generic, requiring lengthy due diligence and expensive structuring fees before placement can even begin.

3. The Security-Led Placement (The IntaCapital Swiss Solution)

For many high-value, security-sensitive deals, transforming the borrower’s risk profile before approaching the lender can be the most efficient path. This is achieved through Collateral Transfer.

  • Risk Mitigation: We introduce a Bank Guarantee or SBLC via a Collateral Transfer facility, providing the lender with a high-grade security instrument. Lenders still perform their own credit and legal assessments, but the BG/SBLC significantly mitigates risk.
  • Network Access: Our core expertise in Capital Raising means we can place this collateral-ready loan package directly with our network of Institutional Investors who actively seek secure, yield-generating deals.

By leveraging this External Collateral, you significantly reduce the lender’s risk, allowing the focus to shift from the search for a lender to the security-backed placement of your Capital Projects loan.

Ready to Access Private Credit?

Don’t spend valuable time chasing elusive Institutional Investors. IntaCapital Swiss specialises in providing the necessary External Collateral to unlock Private Credit for major Capital Projects.

To streamline your high-value Debt Financing and accelerate your Capital Raising success, contact our experts today.

Rebuilding Financial Confidence After Debanking

Written by Joesph Patterson on . Posted in News & Reports. Leave a Comment

Expert Banking Solutions for High-Net-Worth Individuals in the UK and Europe

When the System Says No, We Say “Let’s Begin Again”

In recent years, an unsettling trend has been sweeping across the United Kingdom and Europe: the systematic and often unexplained closure of personal and business bank accounts — a phenomenon now commonly referred to as “debanking.” For many individuals, this experience is not only financially disruptive but also emotionally traumatic. It threatens livelihoods, damages reputations, and isolates those affected from the basic infrastructure of modern life.

Our mission is simple: we assist high-net-worth individuals — those with portfolios exceeding €1 million — who have been debanked, and we provide them with bespoke pathways back into the financial system.

If you’ve found yourself suddenly cut off from traditional banking without warning, without explanation, and without recourse — you’re not alone. And more importantly, you’re not without options.

The Silent Crisis: Understanding Debanking

Debanking is no longer a rare event reserved for the marginal or suspicious. Increasingly, it affects successful entrepreneurs, digital asset holders, politically exposed persons, individuals with dual nationalities, or those engaged in entirely lawful but misunderstood industries such as blockchain, e-commerce, or offshore asset management.

Banks across the UK and Europe are under intense regulatory and reputational pressure. Their risk appetite has shrunk. Complex compliance frameworks now demand enhanced due diligence, and rather than engage, many institutions choose to terminate client relationships pre-emptively.

This creates a chilling effect — and for those affected, the consequences are immediate and harsh:

  • Frozen or inaccessible funds
  • Business disruption and contractual breaches
  • Damage to credit and reputation
  • Inability to meet payroll, pay mortgages, or conduct daily transactions
  • Personal humiliation and stress

Despite this, there is no legal requirement for a bank to provide a reason for closure. There is no ombudsman for swift reinstatement. And there is no public infrastructure offering a second chance. That’s where we step in.

Who We Serve

Our bespoke banking recovery and onboarding services are designed exclusively for individuals and families with asset portfolios exceeding €1 million. We serve clients who:

  • Have had personal or business accounts unexpectedly closed
  • Are facing reputational risk due to political or professional affiliations
  • Work in sectors perceived as “high-risk” by traditional banking institutions
  • Need to establish compliant banking relationships swiftly and discreetly
  • Require advisory support for restoring financial infrastructure

We are not a service for everyone. We do not assist with criminal or sanctioned clients. Our focus is entirely on reputable, solvent individuals who have found themselves swept into the net of overzealous compliance or misunderstood financial profiling.

What We Offer

1. Private Advisory & Risk Profiling Review

We begin every engagement with a discreet, no-obligation consultation. Our in-house compliance specialists and external legal advisers conduct a full review of your situation. We help identify the reason(s) behind your account closure, whether it was risk classification, transaction behaviour, or external flags.

You will receive a risk-adjusted banking profile audit and a clear road map for re-entry into the financial system.

2. Banking Relationship Rebuilding

Through our deep network of trusted financial institutions across Europe, Switzerland, the Middle East, and selected offshore jurisdictions, we are able to make discreet introductions to relationship managers at banks that remain open to onboarding new clients — particularly when referred via trusted intermediaries.

We only work with fully licensed and regulated institutions that meet EU and UK standards.

Whether you require a personal account, business account, escrow solutions, or multi-currency capability, we help restore access where others have failed.

3. Financial Identity Reconstruction

For those who have been debanked, the problem is not simply a lack of access — it is a lack of trustworthiness in the eyes of the system. We assist clients in re-establishing their financial footprint by:

  • Cleaning digital footprints and adverse media
  • Updating KYC and due diligence documentation
  • Advising on restructuring asset holdings to fit compliance expectations
  • Assisting with explanations for past financial behaviour (e.g. crypto transactions, international flows)

This makes you more bankable — again.

4. Ongoing Discretion & Monitoring

We do not believe in one-off fixes. We offer long-term relationship management and ongoing compliance advisory to help you avoid future disruptions. Our clients receive:

  • Proactive compliance updates
  • Pre-transaction screening for red-flag triggers
  • Dedicated point-of-contact for ongoing support
  • Annual reviews to ensure accounts remain in good standing

Our work doesn’t end when the account is open — it continues as long as you need us.

Why Choose Us?

1. We Understand What Others Don’t

Our team is composed of former bankers, legal professionals, and risk analysts. We understand how banks think. More importantly, we understand how high-net-worth individuals operate — and how to navigate the space between.

2. Our Network is Our Edge

You cannot “Google” your way to a private banking relationship. Our value lies in our curated, compliant, and active network of banking institutions that still say yes — under the right circumstances.

3. We Are Discreet and Selective

We only accept clients we believe we can help. Your privacy is paramount. We operate with the highest level of discretion, and we only engage on strict NDAs and confidentiality terms.

4. We Deliver Results

We are not theorists. We are doers. Our track record includes hundreds of successfully restored financial relationships — with satisfied clients in London, Zurich, Lisbon, Dubai, Monaco, and beyond.

Case Studies

Client A – UK Entrepreneur in E-Commerce

Client A had their personal and business accounts at a Tier 1 UK bank closed without explanation. Despite running a seven-figure online retail business and no legal issues, they were unable to open accounts elsewhere due to unexplained flags. We conducted a reputational audit, helped re-structure the business under a clean entity, and introduced the client to a digital-friendly bank in Luxembourg. Accounts were opened within 10 working days.

Client B – Dual National Politically Exposed Person (PEP)

This client’s accounts were closed due to their association with a political figure in Eastern Europe, despite having no direct political activity themselves. We successfully re-established banking via a private institution in the Middle East, accompanied by a legal letter of clearance.

Client C – Crypto Wealth Holder Debanked by Swiss Bank

Client C had over €4M in digital assets and was fully tax-compliant, but their bank refused to renew their account due to new internal policy changes regarding virtual assets. We facilitated onboarding with a Liechtenstein bank experienced in digital asset liquidity, while structuring part of the holdings into a managed trust.

Frequently Asked Questions

Can you guarantee an account will be opened?

No service can guarantee a successful outcome. However, we significantly improve your chances by preparing your profile professionally, matching you with the right institutions, and mitigating historical red flags.

Do you work with sanctioned individuals or criminal cases?

No. We do not engage in any activity that circumvents financial regulations or supports unlawful behaviour. We only assist clean clients facing unjustified exclusion.

Can you help with business as well as personal accounts?

Yes. We assist with both, including holding companies, family offices, and SPVs.

Do you work with digital asset holders?

Yes. We understand blockchain and crypto-related banking issues and offer compliant structuring options.

Can I remain anonymous?

All client engagements are private and protected by professional confidentiality agreements. We do not disclose client identities or case details.

Ready to Rebuild?

If you or someone you know has been debanked and is struggling to re-enter the financial system, we invite you to speak with us. We offer a private, intelligent, and strategic approach to restoring your banking access — and your peace of mind.

Contact Us

Rebuild. Reconnect. Reassure.
Because Financial Freedom Shouldn’t End With a Letter in the Post.

Is China’s Property Crisis Getting Worse?

Written by Joesph Patterson on . Posted in News & Reports. Leave a Comment

Over the last four years a number of China’s biggest property developers have gone into default and today the Chinese economy is hobbled by the world’s largest distressed debt of circa USD 160 Billion. The financial markets were shocked when the China Evergrande Group, at the time China’s biggest property developer, received on the 26th of January 2024 a liquidation order from a Hong Kong court. The group had amassed in excess of USD 300 Billion in liabilities during the debt-fuelled years of the China property boom, and on that fateful day in Hong Kong when their shares stopped trading, their value was down 99% from the peak at USD 275 Million.

Today, four years later, the last remaining titan in the Chinese property developing arena, China Vanke Co., warned that they were facing losses of circa USD 6.2 Billion. In the last weeks of January 2025, Chinese officials finally decided that China Vanke Co. was “too big to fail” (a term that has been used over the years for banks where their executives have failed to do their jobs) and faced with a collapse in the company’s bond price, and officials from Shenzhen (Vanke’s hometown) have taken over operational control. The company is also facing USD 4.9 Billion of maturing bonds and redemption options this year whilst the rating agency Moody’s has downgraded the company to Caa1 (Non-Investment Grade– Substantial Risk) which is seven points below investment grade.

Chinese authorities are working on a bail-out package that will help fill the funding gap of USD 6.2 Billion, which has been welcomed by the financial markets. However, despite the authorities stepping in at China Vanke, plus many stimuli packages from the government, analysts confirm that real estate projects in the hinterland (outside major cities) are not receiving any lending from banks. Furthermore, experts advise that circa 12 developers are currently facing liquidation petitions, restructuring deals are falling apart and on the international front, creditors are losing patience.

Another tale of woe is Country Garden whose name used to be in lights along with China Evergrande, now suffering from weak domestic demand and a declining job market. The company has suffered from a year on year 51% decline with contract sales dropping 59% from the previous year to USD 309 Million (Yuan 226 Billion). According to analysts, one major stumbling block (and this, despite government support) is that a substantial number of buyers prefer to purchase second-hand homes as they have a lack of faith in developers’ abilities to finish projects. The markets are holding their breath to see if Country Garden can reach an agreement with creditors on a revised debt plan. Meanwhile, a liquidation hearing in Hong Kong has been delayed by the court.

Sadly market conditions have worsened, and experts point to Sunac China Holdings, when in 2023 they enjoyed a successful debt restructuring (and was hailed by creditors as a blueprint and role model), have recently advised that they may have to do a second restructuring. Analysts also advise that in Hong Kong’s court, liquidation petitions are piling up – with one of China’s biggest builders Shimao Group Holdings Ltd in the firing line. Elsewhere, and in an unfamiliar approach, China Fortune Land Development Co. (In Default) has scrapped a debt plan already approved by creditors and is going for a court-led decision.

Some experts point the finger at leading communist officials who, when the slump took place, blamed them for turning the economy towards economic growth driven by the technology sector, thereby reducing the role of the property sector. The government then cracked down on the massive leverage being used by developers whilst tackling a housing bubble. The property market then crashed with home prices according to experts falling 30% from their peak in 2021, with the housing sector’s financial contribution to the economy falling from circa 24% to circa 19%.

Initially, China’s answer to the property crisis was not to bail out companies but to rather focus on actually delivering homes to buyers. In this respect, they requested (which means told) state-backed companies and local governments to purchase those homes that remained unsold, whilst providing finance on a limited scale to finish uncompleted property projects. The government then sought to improve demand by cutting mortgage rates and lifting restrictions on buying with an end result of not reflating the market but to manage the slowdown.

However, that strategy appears to be in pieces considering the number of developers queuing up in Hong Kong waiting on the courts’ liquidation decisions. Economists are fearful that the property crisis will continue on a downward track, hampering the government’s goal of kick-starting and reviving domestic consumption. Economists are crying out for more stimuli packages when Chinese lawmakers have their annual meet in March. It is hoped this time that the authorities will offer packages that will be big enough and effective enough to stimulate confidence and consumption, thereby boosting a seriously flagging property sector.

Will Gold in 2025 Outperform its Record Year of 2024?

Written by Joesph Patterson on . Posted in News & Reports, Precious Stones. Leave a Comment

Gold could possibly be on for another record annual performance in 2025, up 28% through to November 2024. Even though consumer demand decelerated, this was offset by investor and central bank buying. In Asia, investors’ presence was a constant and in Q3 2024, western investment flows were fuelled by a weakening US Dollar and lower yields. However, experts suggest that this quite remarkable performance was fuelled by the role gold plays as a hedge amidst geopolitical risk and market volatility.

2024

Data released shows, without a doubt, that 2024 was a record year for gold as it increased by more than 28% where the trading average was up 22% compared to 2023. Gold also hit forty new records against currencies, plus for the first time gold demand surpassed USD100 Billion. 

Other data released shows that in many regional financial markets, volatility and geopolitical risk supported investment demand for gold, especially in OTC *(over the counter) demand. Central banks (who have been net buyers for just about 15 years) were again to the fore, continuing to add to gold reserves picking up the pace in early October 2024. As central bank began to cut interest rates, investors in the western world made a beeline to purchase gold. 

*OTC Market – OTC or Over-The -Counter trading is the process of trading commodities such as gold, stocks, bonds, and derivatives without the oversight of a central exchange. OTC trading is different from exchange based trading where transactions take place on a centralised exchange such as the London Stock Exchange, the Nasdaq, or New York Stock Exchange. OTC trading takes place between a network of participants such as brokers, banks, and other financial institutions that trade directly (not via an exchange) with each other.

2025

The world waits with bated breath to see the outcome of a Trump2 presidency, and the effect the new administration’s policies will have on the economies of many countries. Many experts suggest that the Federal Reserve will deliver 100 basis points cut by the end of the year with the ECB  (European Central Bank) and their associate central banks following suit to one degree or another. Historic data shows that gold has risen by as much as 6% in the first six months of a rate cycle, with its subsequent performance swayed by the depth and length of that cycle. 

Gold’s largest markets are India and China, with both making up 60% of annual demand (not including central banks). In China, experts hope for increased economic  growth (more likely through government stimuli in the Q1 and Q2) to keep gold investment at the forefront of consumer demand. Once again, central banks are expected to have a positive impact on gold with analysts suggesting that the current trend is not likely to decelerate, and some analysts predicting central bank buying could outpace 2024. 

Conclusion

Experts in the arena suggest that gold will remain rangebound, with a dovish Federal Reserve having a positive impact on gold. However, if inflation returns to the US economy as some experts predict (due to Trump2 policies), a reversal in Federal reserve policy will have a negative impact on gold. Geopolitical problems in 2025 are expected to have a positive effect on gold, and as long as India’s economic growth remains above 6.5% demand from that country will be along the 2024 levels.

Analysts advise that currently the same factors are in plac  in 2025 that drove gold’s record breaking performance in 2024, however it could be positively impacted if Donald Trump makes good on his tariff policy and provokes a trade war with investors fleeing to safe havens such as gold. Furthermore, the gold world will be keeping an eye on China, as consumer demand will more than likely depend on improved economic growth.

The Trump Effect on the Economy of China

Written by Joesph Patterson on . Posted in News & Reports. Leave a Comment

The self-proclaimed “Tariff Man” President elect (and ex-President) Donald Trump will reascend to the White House on 20th January 2025, and one of his first orders of business will be to batter China with 60% tariffs on all their export to the United States. Such tariffs, if introduced, will obliterate China/United States trade and will damage exports which has been one of the bright spots in an otherwise gloomy Chinese economy. However, many experts suggest that the Chinese government might deliberately weaken the Yuan, in order to make their exports more competitive, plus they feel that the broad budget deficit will be increased as well in response to the election of Donald Trump.

The election of ex-President Trump could not have come at a worse time for the Chinese economy, which has been struggling for a number of years. The housing market, once the driving force behind China’s economy, is currently a spent force. Analysts suggest that by close of business 31st December 2024, between completed and still under construction floor space, 2.9 billion square feet will remain unsold housing inventory. The downturn in the property market has left local governments shouldering billions in unsustainable debt, with analysts estimating the size of the debt as in the region of USD20.7 Trillion (Yuan147 Trillion), which as a comparison is just over 50% of the national debt of the United States which stands at USD36 Trillion as of November 2024. 

China has been struggling with weak domestic demand in the property sector, and this has been attributed to high youth unemployment, low pensions and wages and a social safety net which is at best chronically feeble. The net result is China’s household spending is 20% points behind the global average coming in at under 40% of Gross Domestic Product, and the government has to either increase the national debt burden or redistribute the national income in order to boost this sector. Indeed, on Friday 8th November 2024, Chinese officials gave indebted local governments a lifeline of USD1.4 Trillion (Yuan10 Trillion), however many economic commentators who are China focused said that they felt a much larger sum should have been allocated such as USD2 Trillion or above.

Therefore, with a struggling economy and masses of local government debt, it is envisioned that Trump’s administration policy of 60% tariffs on China will negatively impact a number of areas within their economy. If China feels that Donald Trump is serious, then output in the short term may well increase prior to the introduction of tariffs. It is, however, felt by many experts that there will be a long-term negative impact on the industrial activity in China. As mentioned above, the Chinese Government will use monetary and fiscal policy to support the economy (especially the construction and housing sectors), however, the decline in private investment and drastically reduced exports to the United States will outweigh any expected fiscal and monetary offsets. 

Elsewhere, experts suggest that another sector to be hit hard by tariffs will be the high-tech electronics sector, with advanced production being taken on in countries such as South Korea and Japan. Tariffs may well also restrict the flow of knowledge, thus eroding competitiveness and productivity in this sector. Furthermore, supply chains will take a hit as companies seek to reposition their operations away from China in the hope that they will avoid tariffs, with the machinery and automotive sectors being hit hard as parts are traded multiple times across border to border before final assembly commences. 

Many analysts are predicting that a Trump2 Presidency will be more destructive than the previous version, and the effect of tariffs on the USD500 Billion worth of goods will ignite a trade war worse than Trump1. It is expected that growth in China will be slower under a Trump presidency, and some analysts are predicting between 1% and 2% drop in GDP. Other experts suggest a minimal fall, as China will embrace greater stimulus and bolster manufacturing, whilst allowing the Yuan to weaken helping to offset the negative effects of Trump2. 

On the geopolitical front, President elect Trump has promised tariffs of between 150% and 200% should China blockade Taiwan, and China’s continued political and economic support for Russia has not gone down well in the west. If China approaches the European Union to increase exports to the Eurozone, Trump has promised increased tariffs to the EU’s exports to the United States. All in all, from the 20th of January 2025 (inauguration day), the US/China relationship could well have negative effects on a global scale.

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