The US has been pounding away on the China relationship, with something happening just about every day. The fencing-in of Huawei, the arrest of an alleged spy, the requirement for Confucius Institutes to register as foreign missions, US ships sailing through well-monitored waters, suspension of the extradition treaty with Hong Kong… these are busy times. But what is interesting is the remarkable restraint of the response from Beijing—so far at least. No major moves against American companies, for instance. Our guess is they have various plans, but are waiting to see how the US election plays out before choosing which one to activate.
The election is the next big event in world history, and in the US-China relationship. Our best guess is that Biden wins the popular vote—Hillary won it, why wouldn’t Joe, and probably by an extra few percentage points. Then comes the Electoral College. The signs are currently that Biden would win, but if its close—and maybe even if it’s not—Trump has stated that he will challenge the result. If that happens, then chaos not so unlike that in Belarus is a possibility. And if Trump wins the Electoral College but not the popular vote, the same Belarus scenario is even more of a possibility. It is going to be a messy period however it plays out, and for this part of the world, as we have said before, the period between Nov 3 and Jan 20 is fraught with possibilities.
The Chinese economy, meanwhile, is doing well in many respects but not so much in terms of consumer spending. That means the stimulus injections are doing the heavy lifting, and that as usual much of the cash flow is being diverted into the property and stock markets, as well infrastructure projects. The statements from on high indicate those in charge of the financial machine are well aware of the risks, and they are past masters at maintaining the balance while managing the flow of events. The dual circulation policy of emphasizing and encouraging domestic economic activity is becoming a bigger and bigger deal, and is having a positive impact. But China still needs the outside economic ties, the foreign investment and the trade. It’s still too early to call the winner of the race to transcend the virus.
Enjoy the weekend.