The week saw lots of action, and the trend remains set in the direction of decoupling. There are now doubts over whether China will meet its purchase commitments of US goods under the “phase one” trade deal agreed earlier this year, and the signs are getting stronger that the US plans to ban the app TikTok, following in the footsteps of India last month. Statements by officials from both sides over the past few days have tended to indicate that, on one side, the Trump administration is determined to push through as much as possible of its China agenda ahead of the November election, while on the other, the Chinese leadership are determined to take every opportunity to demonstrate their determination to hold to their course, whatever the reaction is. We can expect more developments at an even a faster pace in the weeks ahead.
The Shanghai stock market shot up this week, and the RMB hit its highest level since March largely on the basis of urgings in the state media to buy. The Shanghai stock has long been one of the world’s most disconnected from wider economic trends, but economic indicators are showing continuing signs of a China recovery from the virus hole, while the US falls deeper into the morass created by Mr Trump. With less than four months now to go to the presidential election, the odds that he will lose are getting stronger, and the prospect of that alone is unleashing changes in many aspects of the world. We still don’t know precisely how Biden’s team would deal with China, and there is a chance that it would swing back towards the Obama era general approach of a softer touch. But Biden has started to roll out specific policies, and definitive platform planks on foreign policy should be forthcoming pretty soon.
Meanwhile, Beijing announced it would accept a WHO team to visit China to assist in investigating the source of the virus. Who will produce a vaccine first? The race is on. Maybe the British?
Enjoy the weekend.