China remains the world’s second-largest economy and the giant of emerging markets; however, despite this intelligent faith, Xi Jinping’s country is squandering industrial warfare in almost every way imaginable.
The arrest of Huawei’s chief monetary officer, Meng Wanzhou, in Canada last month for violating U. S. sanctions law, followed by the firing of Huawei’s chief advertising officer, Wang Weijing, in Poland last week, shows that China can be a bad actor, simply as Washington thinks. Poland’s story centers on espionage allegations, in which Wang allegedly sought government trade secrets. Huawei’s most recent headlines show how Chinese tech corporations have risen to prominence by copying foreign generation through joint venture agreements or by performing white-collar criminals. movements such as intellectual asset theft and advertising espionage. Huawei is one of China’s largest staff-generation corporations and competes with Cisco Systems worldwide.
Thanks to Huawei, China is being defeated on the PR front in the industrial war.
At the start of the industrial war, China thought it could count on the Europeans as allies. They also hate Trump. China has failed to seduce the EU.
The Shanghai Composite Index is down about 30% in the 12 months. Only Turkey is getting worse.
The stock market is a very poor instrument for measuring Chinese growth. Investors know this. Then they turn to economic knowledge. Industrial production remains positive, but it is declining. Quarterly GDP expansion is slowing. On Monday, China released weak export data for the month of December.
Chinese Industry Knowledge in USD (YoY)
Exports: -4. 4% vs. an estimate of 2% and 5. 4% in November
Imports: -7. 6% vs. 4. 5% estimated and 3% in November
Trade balance: $57 billion versus $51 billion estimated and $44 billion in November
“China’s industry figures released today have set alarm bells ringing,” says Naeem Aslam, lead market strategist at Think Markets in London and a contributor to Forbes. “If you want evidence of the effect of industrial conflicts on a country’s economic health, take a look no further than industry with China. The decrease in the number of exports means a reduction in the number of jobs, which means other direct effects on the (Chinese) economy. Donald Trump can be satisfied with his policies that have brought China in. on my knees. “
See: Cold War Resurgence Pits Chinese Communism against American Capitalism – Forbes
Current knowledge about export expansion also suggests that the recent strength of the Chinese renminbi is likely to be short-lived. Xi would likely be more willing to strike an industrial deal with the United States if the economy deteriorates beyond his expectations. Markets expect Xi to have to give in to provincial-level real estate and banks, which he sees as economically unsustainable.
“China wants to take more competitive steps to stabilize the expansion,” Nomura economists led by Ting Lu in Hong Kong wrote in a note this morning. Nomura expects China’s expansion to worsen over the next six months.
Recent reports that Beijing will cut its official GDP expansion target to the current 6. 5%. The industrial war, a shift in some global economic cycles, such as the technological one, and stricter regulations by Xi’s government are reversing the trend of Chinese expansion.
Of course, all Chinese experts believe that the real GDP figure is closer to 2%. Last week’s latest update on inflation in China showed lower costs across the board, not just oil. Demand is declining. It’s an economy that hits the pause button.
How China Wins
China is betting on the long term. There are no elections on the calendar that threaten to shake Xi’s regime. Unless his economy collapses and unemployment gets out of control, Xi may suffer a bit. He will outlast Trump, who has less than two years left in his term. Current polls, although preliminary, recommend that Trump will lose to the top of his warring Democratic parties in November 2020. The Democratic Party’s two biggest China hawks, Nancy Pelosi and Chuck Schumer, are not running for president. Perhaps Xi can suffice to assume that things will return to the prestige quo, even if existing price lists remain. The previous Democratic administration of Barack Obama liked to complain only about intellectual assets and only used price lists to target a handful of products, such as Chinese tires. , in accordance with the rules of the World Trade Organization. Trump doesn’t care about the WTO, so China wins if a new Democratic president leaves the industry dispute in the hands of those guys who aren’t the president. Xi would love that.
Perhaps China’s greatest “victory” on the industrial front is Vietnam’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. For those who have forgotten, Vietnam is an authoritarian country led by the leader of the Communist Party, Nguyễn Phú Trọng. Vietnam has an outpost for Chinese companies, especially in the productive sector and exporters, who are looking for less expensive hard work and fewer regulations. The industrial deal is necessarily the old TPP, which Trump scrapped when he came to the White House in 2017.
Like U. S. companies in the past, Chinese brands are moving some of their origin chains to Southeast Asia. This is a smart thing to do for some Chinese companies, but unless they bring Chinese personnel with them, it will be a hindrance for blue-collar workers in China and an imminent challenge for Beijing.
China knows that the U. S. is also slowing down. U. S. companies like Apple are wasting money. Current industry insights show that more companies trading with China made less money in December.
Business Analysts at Panjiva Research, S Group
Chinese exports account for just 14% of the commercial sector’s revenue, says Brendan Ahern, CIO of KraneShares, a China-focused ETF firm in New York. This means that China is as dependent on exports as the market creates. “It would be attractive if analysts, who have been battered by industry data, lower their expectations for next week’s release of retail sales, GDP, commercial output and steady asset investment,” Ahern said.
Your expectations decrease. Chinese bulls are an endangered breed.
“The (industry) data suggests that we’re starting to see the effects of the industrial war even though it all spills over into China’s macroeconomic data,” said Nick Marro, China analyst at The Economist Intelligence Unit.
If the effects of the fourth quarter show that companies are being squeezed due to price lists and factor warnings about lower profit margins in the first quarter as a result, then a weaker stock market could put Trump on the brink.
If the U. S. economy continues to recede and the stock market collapses with it, Trump could be more likely to end the industrial war, despite his team’s long-term goals of reducing China’s role in the supply chain of U. S. companies. If that happens, Xi will have more time to adapt and, in the end, leave things as they were before Trump.
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