The first phase deal to partially resolve the US-China trade dispute of the past two years was finally announced, but hold on, it has not been signed yet, and we don’t even know the details of the deal. They haven’t been revealed. Mnuchin said the details will be announced and the deal most likely signed in early January. But one of the interesting details that came out of the aborted agreement in April/May was that the Chinese side was pushing for the full text of the agreement to not be released. We will see.
As to who won, some noted analysts, including economist Paul Krugman say the US lost, and were out negotiated by the Chinese side. Others, including sinocynic Bill Bishop, say the Chinese gave more than the Americans did. The Chinese agreed to buy huge amounts of stuff from the US, enough said Mnuchin to double US agricultural exports to China. But an order is a once-off, and can also fall through before delivery. The real heart of the dispute was not trade deficit but systemic disconnect. To what extent that was addressed in the details, we don’t yet know. Krugman vs. Bishop, verdict announcement postponed. Then there is phase two to address, whatever that will be.
The announcement of a phase one deal, anyway, provided a boost of stock markets on both sides of the Pacific, and the key Shanghai index ended the week a smidgen over 3,000 for first time in a couple of months. But the talk is still of next year being a tough one for the Chinese economy. Officials are working hard to get people used to the idea of the GDP growth number being below the magic 6. The trade deal is just one of the pieces in the puzzle.
In other news, China commissioned its first self-made aircraft carrier, dubbed the Shandong, bankruptcies continued to grow in number and the Supreme People’s Court announced that cases against entrepreneurs caught in difficult financial squeezes would not necessarily be pursued.
Enjoy the dregs of the year.