The recent statements following the bilateral meetings between the US and China suggest that important progress has been made, and more details are emerging compared to the quiet early January round. However the uncertainty surrounding the talks remains high, and if no deal is reached before March 1st, $200bn of Chinese imports will experience tariff increases from 10% to 25%. At the core of the discussion, there are structural issues, such as technology transfers and intellectual property protection.
Chinese New Year brings some hopes on the trade front, as some details are emerging on progress with the negotiations. We expect some sort of conditional deal to be reached; however, uncertainty regarding the bilateral negotiations is likely to persist, particularly because at the core of the discussion there are structural issues such as intellectual property protection, and subsidies and SOEs (Stated-Owned Enterprises), which are not likely to be fully addressed in the short term.
We believe China does not represent a serious risk to global growth. On the economic front, data are mixed: the slowdown accompanying the transformation of the economy in climbing the value chain and moving away from investments towards consumption is so far under control. China’s policymakers seem determined to use the cyclical policy supports to prevent an economic hard-landing.
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