The biggest news of the week in our eyes is trade. Not the threat of a trade war with the US, but rather the announcement of 11 countries to create the TPP economic arrangement in spite of Trump’s decision not to participate. The world moves on in spite of the dysfunction in Washington.
TPP is important because it indicates how necessary such a trade deal is. Obama pushed for it, Hillary would have done it in some form. The existence of the alliance now provides an opportunity for the US, after the mid-terms or whatever comes next in US politics, to link itself back into the world.
But the looming US-China trade war is important too, and while it has always been our view that China has more to lose than the US in such a confrontation, if one was to come to pass, the way it is being handled by Trump is predictably messy and is alienating the very countries that the US will need support from in order to win a trade confrontation with China. Facing the issues is right, but precisely how the issues are faced is crucial.
And then there’s the NPC, which rolls along according to the long-prepared script. The biggest news we have seen so far is the suggestion of a new attempt to squeeze the thin end of a property tax wedge into the brains of China’s middle class. It’s an essential step in terms of stabilizing local government finances and offsetting the inherently speculative nature of the China property market.
The party-state has tried before and blinked in the face of virulent opposition from property owners. Freehold would of course solve the problem. But freehold is not an option on the table and we believe that consciously or sub-consciously that is the reason for the huge middle-class unease about the idea of a property tax.
But a thin end of a tax wedge? Very likely before the end of the Two Sessions. The implications of that for the property market and beyond? Hard to say.
Enjoy the early spring weather this weekend!