In this briefing:
1. Amidst Sino-US Economic Uncertainty…US Ponders Plaza-Style Accord on Trade Dispute
Successful resolution of geopolitical issues pertaining to China’s continued integration into the world economy remains crucial for global corporate profit expectations and risky assets.
Uncertainty about the US economic outlook has increased in recent weeks as testified by falling corporate profit growth expectations, while the recent government shutdown has delayed the release of crucial data required for monetary policy formulation.
China’s economy continues to decelerate, as testified by slowing big ticket activity, but record monthly credit growth in January indicates how the fallout from the US trade dispute has diverted attention away from lowering excessive leverage in the economy, as well as rising bond defaults.
The US will insist that currency devaluation by China cannot be deployed under any Sino-US trade dispute resolution, but this will reduce China’s sovereignty over discretionary monetary policy conduct.
Meanwhile, rumours are circulating that the US wants to impose a Plaza Accord style memorandum for China to be committed to an orderly appreciation of the yuan as part of any trade dispute resolution, but China will be wary of the fate that befell Japan after 1985 following the Plaza agreement.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
