Huawei continues to be the most visible barometer of the state of the US-China trade war. US companies got a further three month reprieve in terms of finding alternatives to Huawei for whatever goods and services they have been purchasing, but despite that, the overall vibe was gloomy. Huawei CEO Ren declared the company to be in battle mode, and the latest sales figures indicating that the company’s sales in Europe have nosedived. Worse, the Canadians said they would not bow to Chinese pressure and proceeded with the filing of court documents related to the US extradition request for Huawei’s CFO, which referred to Huawei’s business dealings with Iran, Syria and Sudan. The question is, what does Huawei’s business look like if it is just China domestic and a bunch of developing countries? It could be that we will find out in the months ahead.
On the flip side of US-China news, China bought a batch of soybeans even after saying they wouldn’t. So that’s nice.
Meanwhile, the RMB fell on Thursday to an 11 year low—7.08 to the US dollar. The Chinese government allowed it to break the 7 barrier a couple of weeks ago, to make a point that it could maybe be willing to devalue somewhat to offset the impact of tariffs, but our guess is that the symbolic would turn to sobering for many Chinese people if the number slipped beyond 7.1. Is it a game of chicken, or is the market pressure such that it is difficult to keep the RMB in the 7 zone? We will find out about that too in the months ahead.
Meanwhile, have a good weekend.