The China-US Trade war and the possibility of a deal have been keeping markets and business people on tenterhooks for a long time now, but only a couple of weeks ago, it felt as if a deal was imminent. No longer. Trump said this week he is in no hurry, an expected meeting with Mr Xi sometime this month seems to be now off the table, the US side has upped the rhetoric on human rights to levels not seen for many years and the Huawei standoff is getting more intense. As someone said this week, the smart thing for the Chinese to do would be to build the Wall, for free.
The impact of all this on the Chinese economy is not clear. The signals are mixed, but on balance the numbers coming out in this current phase are still on the negative side of the line. Shanghai stocks ended the week above 3,000 for the first time in a while, with foreigners and retail investors apparently betting that Those in Command are serious about keeping prices buoyant, but the economy’s growth is unquestionably slowing, and the middle-income trap —the prospect that China’s economy plateaus before general prosperity (however defined) is achieved — is still there. Of course, that would not mean collapse, but simply further slowdown and the need for people to accept more meager prospects for the future. The “meibanfa” mentality of resignation is a powerful force for stability, and for key parts of society, anyway, there would still be the opportunity for a continuation of solid growth for years to come. The lifestyles of the middle class (again, however defined) will power many businesses through.
Enjoy the weekend’s spring weather.
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