China’s leaders are doing their best to send out warm fuzzy vibes to counter the growing chill, offering to cut import tariffs and denying strenuously that there was ever such a thing as a forced technology transfer policy for foreign firms.
Premier Li Keqiang, speaking at the Tianjin alter-Davos, offered a package of friendly policies for foreign investors. Then, 30 minutes later, two Republican congressmen in attendance held a press conference in which they castigated China for what they called “stealing and cheating” and urged the Chinese government to introduce concrete measures to offset the need for a trade war.
Whether the imposition of tariffs on Chinese imports by the US is the right approach is beyond the scope of this comment, but they are at the very least raising questions about how much impact they will have on China’s economy. There is little transparency on that, but we saw this week two sudden and massive jumps in Shanghai stock prices in a way which makes it hard not to argue that the National Team is playing the market, sending a message, smoothing out dips, offsetting negative sentiment… chose your explanation.
The government also announced on Friday that banks could invest wealth management product funds in stocks, obviously to bolster the indices. The overall impression remains that an enormous amount of work is being done to maintain the perception of financial market calm, and the likelihood is that it will be required for some time to come. The US attitude towards China trade would appear unlikely to change even if Trump suddenly disappeared from the stage. This, it would appear, is the real new normal, the start of a new era.