There is no doubt that of all the major economies, China has handled the economic fallout and follow-on of the pandemic the most effectively. With some caveats, of course, but as a new school year begins, China today is operating at a level of normalcy that would have been considered highly implausible a few months ago. That’s the benefit of a system with top-down control and nothing less than total obedience accepted. The response has shown the advantages of the system. That’s the short-term impact. The next thing to watch is the medium-term impact, which is where diversity of risk and responsibility elsewhere could —maybe, perhaps — display its own set of advantages. It’s just too early to say how the economies of the world are going to track over the next year.
For a full return to normalcy globally, we need an effective and accepted vaccine, and it looks like that is coming in a few months, and very likely by the end of the year. But will that be enough to liberate the global travel industry, and allow for quarantine-free travel between even Beijing and Hong Kong? It seems not.
Decoupling watch: the sense at the moment is still that Biden becomes the next US president next January, although it is going to be the dirtiest of fights. China is a high-profile element in the discussions, but the consensus seems to be that whoever wins, the espoused US policy position is unlikely to change much. Goalposts have moved, areas of discussion have opened up, positions have been clarified… a lot has changed since the Obama era. However, as we have said, it is our belief that Trump would be the preferred winner from this perspective.
The deadline set by Trump for a TikTok sale — September 15 — is getting closer, and a shift in regulations on the China side has muddied the waters. How it plays out is anyone’s guess right now. The alleged sale price is already dramatically lower than what the app was worth before this all started. But would Beijing be willing to see Bytedance lose $30 billion for a principle, and to see how a TikTok ban played out? Presumably the US government would require Apple and Google to remove the app from their online stores and … stop the apps operating on phones? How would it work? It’s a fascinating case. One of many out there right now.
There are a bunch of other really interesting developments worth following, and reading the news assiduously on a daily basis is becoming a must. We have never seen a situation more fluid than the one we face today. But it’s the November US election that rules in terms of significance, by a wide margin. Eight weeks and a couple days to go.
Have a good weekend.