China Matters: PLMR Publishes Fourth in Series of Reports on China

PLMR

Today we launch the fourth in our series of reports on China. Our Team Members with a wealth of expertise in Chinese affairs have been examining different areas of China-related business. Our fourth report will address the US-China relationship and the ongoing trade dispute between the two countries.

The report comes at a tumultuous time after a steady decline in relations over the course of 2018 and amidst continuous fluctuation in the state of the US-China relationship.  Also the stockmarkets had a terrible fourth quarter in 2018 with huge falls across a range of equities and funds linked to China – linked in no small way to this very important and special relationship.

President Xi Jinping’s transformative economic vision outlined in Xi’s Economic Thought calls for quality of economic growth underpinned by stability.  Growing tensions and increasing risk induced by the dispute with the US makes economic stability even more crucial aim for China. With this in mind, and with many differing views existing over the strength of the Chinese economy, Xi is reluctant to engage in an extended dispute that would thwart the success of his plan.

China has a stated ambition to be a responsible global power with commitment to international cooperation and global economic integration. China has been cautious with regards to this integration yet Xi has encouraged opening up to market forces. The dispute presents an opportunity for economic reformers in China whose calls for measures such as market access and fewer subsidies for state-owned enterprises may align with certain US demands.

Xi’s hope for a positive outcome in the dispute is evidenced by domestic measures taken to slow its impact and efforts to deepen diplomatic unity with the rest of the international community. This hope was further compounded by the Chinese government arriving at the G20 summit with some willingness to make concessions.  However, the erratic tendencies of the current US administration and the spilling-over of the dispute into issues other than trade complicate what remains an unpredictable and fragile situation.

Those hoping for a conclusion to the dispute will have taken some comfort in the G20 summit at the end of 2018 , with both sides at least somewhat willing to engage in discussion following the continuous breakdowns of previously scheduled talks.  Whilst Trump’s 90-day reprieve of further tariffs opened up the countries to negotiating a solution, his threats still stand if a deal cannot be reached. Moreover, tensions continue to arise, most recently with the arrest of Huawei CFO Meng Wanzhou which casts an ominous cloud over negotiations. It remains to be seen whether these two global powers can reconcile this sensitive point in their long and complex relationship. But what is clear that January 2019 will be a crucial month.

You can read the full report here.

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