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The so-called phase one trade deal that the U.S. and China are expected to sign won’t solve all the problems the global economy faces right now, former U.S. Treasury Secretary Larry Summers said Wednesday.
U.S. President Donald Trump said both countries were looking for a location to sign the partial deal — which according to Reuters, could take place this month. That development has fueled recent optimism in financial markets.
“I’m all for it,” Summers told CNBC’s “Street Signs Asia” from the Credit Suisse China Investment Conference in Shenzhen, China.
“But I think we’ll be kidding ourselves if we thought we were one signing ceremony away from some kind of economic nirvana. There are deeper and larger issues that are holding back rapid global expansion,” he added.
Summers was Treasury Secretary under former U.S. President Bill Clinton and an economic advisor for former President Barack Obama. He’s now a professor at Harvard University.
Global economic growth has slowed since last year — coinciding with the start of the U.S.-China trade war. The International Monetary Fund said in a report last month that the global economy is projected to grow 3% this year, slower than last year’s 3.6% and 3.8% in 2017.
Summers said even if both sides sign the partial deal as planned, “there will still be large tensions and uncertainties” between the two countries — which would weigh on the global economy.
His comments echoed the sentiment of other analysts and company executives who said longstanding concerns about Chinese theft of U.S. intellectual property and forced technology transfers would take longer to resolve.
China’s economic outlook
Other than uncertainties on the trade front, Summers said financial strains in China and concerns in Europe also contribute to the current weakness in the global economy.
In the coming years, structural changes within the Chinese economy means the country would contribute less to global growth than it did before, according to Summers.
He cited a rapidly aging population in China as one factor behind that trend. China has for years been a large contributor to global growth, but the economy is now expanding at a slower rate — which many economists said is more sustainable for the country.
“I think the next decade in China is going to be less miraculous than the last two,” Summers said. “I would be surprised if China was able to be a source of strength for the global economy over the next decade in a way that … it has been in recent decades.”