The Xi-Trump meeting at G20 went much as we predicted – there was a delay in the implementation of higher US tariffs on Chinese imports, and that gave the markets an excuse for a temporary bounce. But it then unraveled into uncertainty, with the US and China sides providing different versions of what had been said, and Trump as usual confusing everything with tweet storms. This time the storm, amongst other things, triggered a Wall Street sell-off of 799 points.
There is a 90-day period for China to show sincerity in making changes, but there was even uncertainty over when that clock started ticking. The US side in the negotiations is reportedly being led by Robert Lighthizer, one of the China hawks, so in spite of all the flurries, there is still no sense of either a lessening of determination on the US side to achieve some fundamental changes in the way China interfaces with the outside world or a rise in willingness from Those in Command to commit to any fundamental shift in the way the party-state operates.
So, the betting over here is on things getting more tense and difficult before one side or the other relents. Irresistible force and immovable mountain, but of course not forever. The whole sense of the talks and their aftermath was that the pressure on China to move is greater than on the U.S. To repeat the point once again – China needs the world more than the world needs China.
As if to emphasize this point, on the very day of the Beunos Aires meeting, the CFO of China’s highest-profile company internationally – Huawei – was detained in Vancouver at the request of the US authorities in relation to Iran sanctions violations – the same thing that got ZTE. Huawei is not as reliant on US patents as ZTE was and this is not a death-threatening corporate experience, but on the other hand, it was definitely a good week for Huawei not to be a listed company.
Meanwhile, BT in the UK announced it would not allow Huawei to participate in the 5G upgrade and the head of Britiain’s intelligence service took the extraordinary step of publicly stating that Huawei should not be given access to UK telecom systems.
And then on Friday, Huawei made a surprising announcement that it would agree to UK demands over network security to avoid being shut out of future British projects. What demands is not yet clear. Directions to the backdoor, perhaps? But losing the UK might be a step too far for Huawei, as they are have also been frozen out of Japan, New Zealand and Australia in the last few weeks.
It’s going to be a cold winter.