Next China: Back on Track
The outlook for a potential trade deal got a tad more rosy this week.
President Donald Trump spoke with tech executives about the ban on selling products to Huawei and potentially easing that prohibition. China signaled readiness to buy U.S. agricultural goods. American and Chinese negotiators also began preparations for their first face-to-face meetings since talks broke down in May.
There’s nothing easy about what lies ahead for Chinese and American negotiators, but at least they're talking.
One aspect of U.S.-China relations that got a bit noisier was on the military front. China this week published its first defense whitepaper since 2015, and used the opportunity to accuse the U.S. of undermining global stability. Beijing also denied it had plans for a military base in Cambodia. The U.S., meanwhile, sailed a warship through the Taiwan Strait, adding to tensions that had already flared as a result of a potential sale of American arms to the self-governed island.
The situation in Hong Kong doesn’t appear to be getting better. There was more violence last weekend as police fired tear gas to disperse groups of more-aggressive protesters, some of whom defaced the national emblem at the Chinese government’s representative office in the city. In another part of Hong Kong, groups of masked men carrying sticks attacked protesters. Chief Executive Carrie Lam has condemned both acts and police have said that some of the men arrested for attacking protesters had links to local organized crime syndicates known as the Triads.
Shanghai this week celebrated the launch of the city’s new venue for listing shares of start-ups, dubbed the Star market. There was no shortage of enthusiasm. Shares of all 25 companies initially listed on the board rose, gaining by an average of 140% on their first day of trading. Authorities have envisioned the Star market as a way to encourage technological innovation and to also test regulatory changes for the country’s stock market. It’s also helped create wealth, with the board’s launch minting three billionaires on its first day.
Daimler seems to have plenty of fans in China. It was revealed this week that Beijing Automotive Group, which has worked with the German industrial icon to produce cars in China, acquired a 5% stake in the maker of Mercedes-Benz vehicles. Together with Daimler’s top shareholder – Geely’s billionaire owner Li Shufu – that takes Chinese ownership to almost 15%. Whether stronger ties to the world's biggest car market will bolster the company's earnings remains unclear.
And finally, the trade war is creating winners and losers in industries around the world, including in wine. Australia this week reported a 7% increase in the value of wine exported to China in the 12 months to June 30, hitting a record $845 million. By contrast, the value of American wine exports to China fell 25% last year. That’s because China’s combined tax rate on a bottle of U.S. wine, thanks to retaliatory tariffs, is now 93%.
©2019 Bloomberg L.P.