• Sunday, June 16, 2019

China's economy is fine, Trump and Xi won't fight a trade war and the Fed is a friend

Discussion in 'China & Far East' started by Han Patriot, Jan 14, 2019.

  1. Han Patriot

    Han Patriot SENIOR MEMBER

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    Trump and Xi won't fight a trade war and the Fed is a friend

    • The triad of China’s economy, trade war and the Fed’s policy is a false alarm.
    • The main problems are America’s dangerous security challenges around the world involving military confrontations with China and Russia.
    • The White House should not be pushed by its domestic adversaries to raise those tensions. A constructive relationship with China and Russia is in the interest of America and the rest of the world.
    China's economy is fine, U.S. President Donald Trump and Chinese President Xi Jinping won't fight a trade war and the Federal Reserve is a friend.

    That's what I think of the three main issues worrying the financial markets.

    Let's begin with a test about the state of China's economy.

    Does China have an inflation problem? No, the reported headline price inflation in December was 1.9 percent. That's what hits the Chinese real purchasing power and determines the scope of discretionary monetary policy. Again, that's the headline rate because Beijing does not play around with an array of manipulative inflation "measures." For last year as a whole, China's inflation was 2.1 percent — a number that would even pass the price stability test from the Bundesbank's stern taskmasters.

    Is China having a problem of bad public finances? Perhaps a spot of a local difficulty, as the Brits would say, but nothing that China's 46 percent gross savings rate can't handle. Broadly defined public sector accounts are expected to show a budget deficit of about 3 percent of GDP for the last calendar year, and the gross public debt is currently estimated at 46.3 percent of GDP. The debt could be a significant underestimate, but only China knows the truth about that, partly as a result of its own methodology of defining and measuring national accounts.

    Does China need to import foreign savings to finance its public debt and budget deficits? No, China is a net capital exporter to the tune of 1.2 percent of its GDP.

    Trump handed a trade round to China
    That is a result of a positive trade balance. This year, for example, net exports are expected to contribute half a percentage point to GDP growth.

    What you see there is an economy that has plenty of active demand management instruments to prevent a major growth slowdown. Some of those are already at work to fine-tune structural adjustments and to move the changing composition of aggregate demand toward household consumption, business capital outlays and more selective infrastructure investments.

    Aha, I hear you saying: You are glossing over the horror stories of a "heavily indebted economy," the "disaster of shadow banking," "bankrupt local governments," etc.

    Again, only the Chinese government knows the truth there. Beijing won't tell, and I don't want to operate with unofficial guesswork or pure inventions. But, whatever the truth, China is not Greece or Italy. The macro-equilibrium numbers show that Beijing has enough firepower to manage its internal debt.

    Now, policy errors are always possible, but the probability of that happening is not very high in view of China's stellar track record of economic management. That's all Premier Li Keqiang is watching — under the Politburo's menacing gaze.

    Trump sounds like he might be joking that he got China over the barrel on trade because the Chinese economy is in bad shape. No, it is not. China's policy-induced growth slowdown to the range of 6 percent and 6.5 percent is something Trump can only dream about— and fear — because a confident China is not a desperate trade negotiator.

    The proof is that, for two years now, Trump got nowhere with China on trade. The Chinese trade surpluses with the U.S. have grown at a strong rate, and last year's hit a record $323.32 billion, according to government data released on Monday. Meanwhile, Trump keeps firing off tweets about "big progress" on trade talks with China.

    No progress at all, in fact, because Trump put trade negotiations on a wrong path. Instead of seeking to impress China's Xi with missiles fired at Syria "in lieu of after-dinner entertainment" during the Florida summit in April 2017, Trump should have been a gracious host striking up a trade deal as a matter of great national priority.

    The Fed won't make waves
    But Trump did nothing and got nothing. Worse, Trump sidelined the whole trade negotiating process by hitting China's systemic red lines to hear — again — last week that China will ignore such reform requests, but that it would be buying American farm products and open up, on its own terms, some segments of the economy to American trade and investments.

    That's what Trump could have got easily from Xi in Florida almost two years ago.

    Trump now realizes that China won't be intimidated, and that import tariffs and other impediments to trade are a blind alley he cannot afford in the run-up to his increasingly tenuous re-election bid.

    So, cross the trade war with China out. China never wanted it, and Trump missed the opportunity to make a deal on Xi's mantra: A "win-win cooperation."

    Sadly for the U.S., China won this round. And China's trade surplus with the U.S. will continue to soar.

    Trump will now be looking up to Xi for trade handouts, and if he wants anything to take home as an election prop from his next meeting with North Korean leader Kim Jong-un.

    Fortunately, the Fed is an infinitely simpler story.

    Having done with panache its ego trip last month (a 25 basis point rate hike), the Fed is now being reassured by quiescent inflation expectations and a flattening yield curve. Barring an unlikely inflation flare-up, or price tensions in energy markets, the Fed can leave the economy in an adjustment process under conditions of full employment and easy credit terms.

    With $1.5 trillion of excess reserves in the interbank market, the Fed can comfortably proceed to gradually normalize its bloated $3.4 trillion balance sheet.

    https://www.cnbc.com/2019/01/13/-ch...ump-xi-wont-fight-trade-war---commentary.html
     
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  2. SBUS-CXK

    SBUS-CXK SENIOR MEMBER

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  3. Viva_Viet

    Viva_Viet SENIOR MEMBER

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    Why?? No one wanna be friend wt CN now, even Poland also wanna slap CN harder

    Without daddy Soviet and protection from communist bloc,CN is just a dead beast.:cool:
     
  4. SBUS-CXK

    SBUS-CXK SENIOR MEMBER

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    Ah. Thank you Soviet Union, Vietnam, Poland, US.
    But, The U.S. economy collapsed. The dissolution of the Soviet Union in 1991. Poland is just a joke. Vietnam? too close to China. It's all their misfortune.
     
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  5. Viva_Viet

    Viva_Viet SENIOR MEMBER

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    Wow, so US collapsed ??? Oki,just sit and watch, more fun is coming :cool:
     
  6. SBUS-CXK

    SBUS-CXK SENIOR MEMBER

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    Ah, but I'm curious - what can you do? Let's wait.
     
  7. Viva_Viet

    Viva_Viet SENIOR MEMBER

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    I dont need to do anything. Just sit and see CN or US will collapse in 2023 and I think CN is loser cos your army suck, corrupted, useless, stupid PLA generals only know Human wave tactic that no longer work.

    Why PLA gens r stupid and only know Human wave tactic? Cos Cnese IQ is very low can not invent a better tactic, so low IQ Cnese cant survive.thats it :cool:
     
  8. SBUS-CXK

    SBUS-CXK SENIOR MEMBER

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    Ah, but if China and US did not collapse in 2023. What would you do?

    We humans can't rely solely on fantasy. Similarly, we need to consider reality... Of course, non-human beings need fantasies. Because their reality is too failing.:-)
     
  9. Viva_Viet

    Viva_Viet SENIOR MEMBER

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    Ha ha.just sit and wait till 2023 first. Funnythings just start. Cad and Poland just have started the fun to Huawei CN, the whole EU soon will follow. still have 4 years to watch :cool:
     
  10. Feng Leng

    Feng Leng SENIOR MEMBER

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    What the author is saying is that it is not in the interests of China to fight a trade war and while the US huffed and puffed about a trade war now it is so economically weakened that it would be foolish to proceed.

    Still, Trump doing something stupid cannot be ruled out, especially now that he painted himself into a corner with his rhetoric. The author is correct on all point EXCEPT he overestimates the rationality of the White House. Therefore, we are still looking at a new Cold War and trade war -- possibly leading to actual war or even nuclear war.
     
  11. SBUS-CXK

    SBUS-CXK SENIOR MEMBER

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    Ah, the non-human world is very interesting. I guess it thinks Poland can represent Germany, France, Britain...
    But who's going to save the Canadian spies?

    Wow, I just found out... You hardly know anything. :-)

    So, you're just playing in your world?

    Why every time I reply to you. I feel like I'm talking to a 5-year-old baby?
     
  12. Viva_Viet

    Viva_Viet SENIOR MEMBER

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    Sit, wait. Sit again and wait again till 2023. Why so rush ??
    wow, if u so smart, then tell Xi to replace stupid PLA generals, who only know human wave tactic, so CN can be as strong as US and can take the whole SCS control as u wish. ( CN only control 10-12 % now why VN control 60-65%)

    Of course u cant, cos no Cnese can make any better tactic due to low IQ haha :cool:
     
  13. SBUS-CXK

    SBUS-CXK SENIOR MEMBER

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    ah, please wait, you have made your wish list 2023. Why are you so rush announcing it in 2019? And, if you are disappointed, do you choose to kneel or commit suicide?

    Ah, see how strong Vietnam is in SCS. Now tell the Americans.
     
  14. Viva_Viet

    Viva_Viet SENIOR MEMBER

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    Dude.I annouced CN 2023 chaos in early 2018 or 2017 ( cant remember ) to let every one know what will happen to CN and they'd better to stay far aways from CN cos she is dying due to weak, corrupted army PlA and due to CNese IQ is low,too. No use to die wt a sinking ship.

    Many ppl listen to me and they avoid to buy Cnese stocks like Xiaomi, Huawei and they should tks for my annoucement now cos Huawei, Xiaomi stocks r falling sharply :cool:
     
  15. SBUS-CXK

    SBUS-CXK SENIOR MEMBER

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    Ah, is this your world?

    Baby, need I provide a list to tell you the real world?:-)

    You're so cute. you give me a lot of fun.

    I'm curious to know now, when you see the real world... Do you choose to kneel or commit suicide? Tell me your choice?

    I have started my list, hope you will not collapse in this evening.:enjoy: