‘Continued Hard Work Is Required’: China, U.S. Agree To Disagree At Trade Summit And I’m Not Sure That Counts As ‘Winning’
Well, Hong Kong shares fell again on Friday in a continuation of Thursday’s rout as concerns over trade and jitters over what continued tightening from the Fed might entail in terms of capital flight continue to weigh. Remember, authorities in Hong Kong have issued a series of warnings of late re: rates.
A quick glance looks like we hit the lowest intraday levels since early April on Friday:
On trade, Mnuchin and his not-dream-team are already headed back to Washington and apparently, there are still plenty of unresolved issues. China’s Xinhua suggested that some points had been resolved but “other issues remain relatively big.”
“China and the United States have wrapped up their first round of trade talks with no breakthrough, agreeing only to have more dialogue to ease tensions,” SCMP reports, adding that “a draft framework of US demands asked China to cut the trade deficit by at least US$200 billion by the end of 2020 [and] also demanded Beijing halt subsidies for industries under the ‘Made in China 2025’ plan, and that China should not resort to retaliatory measures against Washington.”
The yuan reversed gains once it became clear that “agree to disagree” was about the most charitable interpretation possible of the meetings between Mnuchin and Chinese officials.
The PBOC strengthened the yuan fixing for first time in 5 days on Friday. Recall that recent efforts to guide the yuan lower were pretty aggressive.
“China might be concerned that potential worsening of trade conflicts with the U.S. will likely hurt exports, and it might be sending a signal that the currency can be weakened further if tension escalates,” Scotiabank’s Qi Gao said earlier this week, before noting the obvious which is that “the PBOC won’t allow rapid declines, as such moves could trigger large capital outflows and are hard to contain.”
Now that the talks ended in a stalemate, the question is what comes next.
“The market has been disappointed as the China-U.S. trade talks failed to make a breakthrough”,Mizuho’s Ken Cheung said Friday. “This increases the possibility for China to curb further yuan appreciation, given concerns over the negative impact from a trade conflict on the nation’s economic growth.”
The you go. For now, we’ll leave you with the statement from Xinhua:
China and the United States reached agreements on some issues in their economic and trade consultations in Beijing from Thursday to Friday, and agreed to set up a work mechanism to keep close communication.
Chinese Vice Premier Liu He, also a member of the Political Bureau of the Communist Party of China Central Committee, held candid, efficient and constructive talks with the U.S. delegation led by U.S. president’s special envoy and Treasury Secretary Steven Mnuchin, on economic and trade issues of common concern.
The two sides agreed that a sound and stable China-U.S. trade relationship is crucial for both, and they are committed to resolving relevant economic and trade issues through dialogue and consultation.
The two sides had thorough exchange of views on issues including increasing U.S. exports to China, bilateral service trade, two-way investment, protection of intellectual property rights, as well as resolving tariff and non-tariff issues, reaching consensus in some areas.
Both sides recognized that given that considerable differences still exist on some issues, continued hard work is required for more progress.
They also agreed to stay in close communication on relevant issues and establish a corresponding work mechanism.
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