We’re speeding ever faster towards something, it’s not clear what, but the current trajectory of macro events is not conducive to happy times and peaceful nights. The list of issues that are moving towards more explosive is long, and the US-China relationship is just one of them, albeit an important one. The decoupling proceeds and the tensions are rising in all sorts of ways, even setting aside the tweetstorms from Trump and the derisive responses they elicit from Beijing. The virus origin question, completely overplayed and incompetently handled by Trump and Pompeo, has faded for now, and events around the World Health Organization have surely played more positively for Beijing than Trump. Our view remains, however, that despite the acrimony, Zhongnanhai would prefer to see Trump do another four years. The prospect of further dismantling of global structures would outweigh, we believe, the impact of tariffs and tweets.
Meanwhile, the financial aspects of the US-China relationship are getting interesting, and there is a sense that many Chinese companies are going to be leaving the US markets, and fewer are going to be heading there to list in the future. Case in point: Baidu is reconsidering its US IPO plans.
Domestically, the delayed NPC session got underway, and as expected there was no announcement of any GDP growth target. The government budget deficit target was left open at “over 3.6% of GDP,” so stimulus funds will be injected as required.
Enjoy another summer weekend.
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