Some clarity erupted this week, or at least various logjams seem to get untied. It appears that we now have the terms agreed for a partial deal between China and the US on trade and related matters, the Conservatives scored a big win in the UK election which should mean that Brexit happens, and the Central Economic Work Conference conducted a three-day discussion in Beijing and laid out the skeletal expectations for next year, which amount to acceptance of slowdown and extremely careful manipulation of credit, debt, investment and defaults to keep the economy steady. The GDP growth rate for 2020 will have been discussed and probably decided but we won’t find out what it is until March. But the expectation is 6%, which is at least a target to aim for. It’s going to be a tough year, and this is a tightrope walk. But they are good on the high wire.
A partial deal with the US will help, always depending upon the terms, which at the time of writing are not fixed and announced, but are said to include a massive $50 billion in purchases of US agricultural and other products by China and a reduction – but possibly not a complete cancellation? – of the tariffs on Chinese goods entering the US. A deal of any sort will take some pressure off the Chinese economy, and it sounds from what we know as if the more fundamental changes required by the US have been put to one side.
If Boris victorious now does Brexit, as is widely assumed, then that should also provide opportunities for China in the short and medium term, in that it makes the EU weaker and China’s position stronger in terms of discussions with any one player.
In other news, company default-related news continued to grow, inflation is high thanks to pork prices, and there were various other indicators of the Great Decoupling – that is, the splitting of China and the West into two zones – regardless of what happens on the trade deal.
We’re getting close to the end of the year, but we still don’t think 2019 has yet delivered all its surprises. Stay tuned and have a great weekend.