The vibes on the US-China trade talks are all increasingly negative and the sense is of a hardening of positions on both sides. An interesting analysis this week suggests that China is going to be a key issue in the run-up to the 2020 US election and it is likely not going to be advantageous to appear “weak” on the topic. Amidst the flood of related news, Google, the major tech company we tend to distrust the least, announced this week that it has finally abandoned its China search project. Huawei announced it would cut its staff in the US and invest $3 billion into Italy, and Italy announced it would go full steam ahead with Huawei on its 5G network. That will presumably have implications in terms of US intelligence sharing at the very least. Precisely how far the US goes in attempting to hobble Huawei is not clear, and we still don’t for sure if Google will be able to supply its Android operating system for Huawei smartphones. If it can’t, Huawei’s consumer business is in deep doo doo. The assumption had been that Huawei’s Hongmeng operating system was an effective substitute for Android, but a senior Huawei official categorically denied the system was for smartphones, which presumably means Huawei currently has no alternative.
Meanwhile, China’s total pig population today is 26% down on this time last year due to swine fever deaths and preventive culling. The GDP number for Q2 was 6.2%, a modern historic low, but the market saw positives in better June numbers compared to April and May. Overall, however, the economy is continuing to slow. Local governments are under growing fiscal pressure and, looking for new sources of revenue, want to boost the profits of SOEs in their areas. But how does that impact on private companies? Not positively.
The leadership is heading for the seaside in Beidaihe. You have a good weekend too!