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UK PM Boris Johnson speaks with China President Xi – says “I love China” (or did he?)

Chinese state media reports that BJ proclaimed his love for China in his phone call with Xi, which came just days after US President Trump threatened BJ over Huawei

You’ll recall the UK is OK with granting sensitive contracts to Huawei despite Trump’s opposition.
On the love, South China Morning Post says:
  • Johnson displayed a cosiness with Beijing that contrasts with his hardline approach to the European Union amid Brexit trade talks.
(SCMP link is here for more)
More:
“Britain welcomes investment from Chinese companies,” Johnson told Xi, according to Chinese state broadcaster CCTV. “We would like to strengthen our cooperation with China under the Belt and Road Initiative.”
Putin, Trump, Xi, Johnson.
Sheesh.
Keeping track of who owns who is getting complicated.
Chinese state media reports that BJ proclaimed his love for China in his phone call with Xi, which came just days after US President Trump threatened BJ over Huawei

Yen crosses making the most of the good feels over the phase 1 trade deal

Positive sentiment is likely to persist into the signing of the US-China phase one trade deal on Wednesday January 15

USD/JPY is having an OK sort of session, on approach to its Friday high above 109.65. Yen crosses are generally higher also, AUD/USD is putting in some consolidation above 0.6900, kiwi also is near its recent highs and EUR is about to test its Friday high also. All these were helped along by some USD weakness on Friday on that disappointing NFP result.
Meanwhile the offshore Chinese yuan is pushing higher agisnt the USD also, benefitting also from phase1-itis.
Having said all this, the ranges here are not large for the majors, it is Asian after all. Its also a holiday in Japan today (markets closed).

The two major risk factors in markets for 2019 will still be there in 2020

US-China trade and Brexit worries will not go away despite some improvement in their respective rhetoric at the moment

We’re getting closer to a Phase One trade deal and Boris Johnson just won big in the UK election last week. Two of the biggest risk factors that has plagued markets this year appear to be finding some form of conclusion, but are they really?

US-China trade war

US-China
As great as the Phase One trade deal is and will be, it isn’t the “be all, end all” deal that will see US-China relations significantly improve.
This is merely a temporary ceasefire at best and at worst, it’s just a delusion to keep some hope that both sides are not yet ready to engage in a full-blown trade and geopolitical war.
The Phase One deal will include tariffs rollback by the US in exchange for China purchasing more farm products – to try and reach $40 to $50 billion annually – as well as some “firm” commitments on technology transfer, currency and opening up of its economy.
The catch here is that it will include some subjective way of determining how both sides will live up to their respective end of the deal. That tells me that ultimately, this will eventually lead to either one of them calling the other out when the time is right.
As such, don’t expect the hostilities and trade worries to die down just because the Phase One deal has been signed – if it even does that is. This is a worry that will haunt markets for many more years to come and 2019 is but a taste of what it can be like.

Brexit

Boris Brexit
Boris Johnson got his much sought after majority in parliament – quite comfortably as a matter of fact – and now he can get his Brexit deal across the finish line. Easy-peasy.
Sadly, this is just merely the starting point in the whole Brexit process.
Once Johnson gets his deal through the legislative hurdles in parliament in January next year, he will have to then go on to negotiate a future trade relationship with the EU.
And for the uninformed, they will only have until the end of next year to finalise a deal and to try and implement it thereafter. Otherwise, the UK will leave the EU without a deal.
Yes, a no-deal Brexit is still on the table as long as the UK and EU cannot agree to a trade deal during the transition period next year.
That can still be avoided though if the UK requests an extension to the transition period before July next year. However, Johnson has categorically ruled that out repeatedly over the past two months in what looks to be a gambit to pressure EU leaders during talks.
We’ll see how all of that plays out but it is clear as day that both sides won’t get a deal done before 31 December 2020. That is all but a pipe dream.
As such, we will have to see if Johnson will find it sensible to negotiate further in the coming years – prolonging the Brexit uncertainty – or opt to crash out of the EU without a deal, wasting all the time we have spent extending the Brexit deadline since March.

China has agreed to buy USD50bn in ag products in 2020 (sources)

China trade news following this earlier:

  • China, US have agreed to some tariff reductions and a delay on tariffs set to go into effect on December 15
  • China has agreed to make $50 billion in agricultural purchases in 2020
Headlines via Reuters, the wire citing a source familiar with the situation.
So yeah, as expected the trade ‘deal’ is pretty much a nothingburger except for China buying a few soybeans and what have you (that they need anyway).  As tipped miany, many times over past months.

China has ordered government offices, public institutions to remove foreign computer equipment & software

The Financial Times reports on the latest from China

China’s administration has ordered all government offices and public institutions to remove foreign computer equipment and software within three years
  • targets Chinese buyers to switch to domestic technology vendors
Sounds like the Chinese version of the Trump admin’s directive to halt ourchases of Chinese tech?
Here is the FT link, may be gated.
And Huawei we go!
Financial Times China microsfot dell
This is unlikely to be viewed as a positive for US-China relations. Should be a ‘risk’ negative.

China likes Trump as US president: a “business man”, “would be glad to have him re-elected”

Despite the US-China tensions it seems China is very happy to be negotiating with US President Trump.

Washington Post carries the endorsement:
  • “Trump is a businessman. We can just pay him money and the problems will be solved,” said a politically connected person in Beijing, speaking on the condition of anonymity 
  • he is “easy to read,” said Long Yongtu, a former vice minister of foreign trade
  • “We want Trump to be reelected; we would be glad to see that happen.”
Its worth checking out the article, there is plenty more. Here is the link and it isn’t long.
It makes the ‘China is waiting it out until after the US election’ point of view less valid?
China is very happy to be negotiating with US President Trump.

Tariffs being imposed Dec.15 if no China trade deal, says Mnuchin

U.S. Treasury Secretary Steven Mnuchin said on Monday that an additional round of tariffs on Chinese imports will likely be imposed if a trade deal with China has not been reached by then, but added that he expected the agreement to go through.

“I have every expectation – if there’s not a deal, those tariffs would go in place – but I expect we’ll have a deal,” he said in an interview with CNBC, when asked about a round of tariffs scheduled for Dec. 15.

U.S. President Donald Trump said on Friday that China and the United States had reached the first phase of a trade deal that covered agriculture, currency and some aspects of intellectual property protections, and would ease the reciprocal trade restrictions that the world’s two largest economies have been imposing for 15 months.

But officials on both sides have said more work is needed to finalize the accord, and Trump acknowledged the agreement could still collapse. U.S. Trade Representative Lighthizer said on Friday that Trump had not made a decision about the December tariffs.

Mnuchin said more trade negotiations at various levels would take place over the coming weeks, including a phone call between himself, Lighthizer and Chinese Vice Premier Liu He, and talks between Trump and Chinese leader Xi Jinping.

Asked about a dispute between China and the U.S. National Basketball Association stemming from a tweet by Houston Rockets manager Daryl Morey expressing support for pro-democracy protests in Hong Kong, Mnuchin said he hoped the two sides could come to a solution.

Chinese companies looking to buy U.S. farm products -Xinhua

Some Chinese companies are seeking new purchases of U.S. agricultural products, China’s official Xinhua News Agency said on Sunday, citing authorities, as Beijing and Washington look for ways to end a protracted trade war.

U.S. President Donald Trump and Chinese President Xi Jinping agreed at last month’s G-20 summit in Osaka to restart trade talks that stalled in May.

Trump said at the time he would not impose new tariffs and U.S. officials said China agreed to make agricultural purchases. But Trump said on July 11 that China was not living up to promises to buy U.S. farm goods.

Chinese businesses have made inquiries with U.S. exporters to buy crops and agricultural products and applied for the lifting of tariffs, Xinhua said, citing Chinese authorities. China’s Customs Tariff Commission will arrange for experts to appraise the Chinese companies’ tariff exclusion applications, Xinhua said.

“Relevant Chinese departments expressed hope that the United States would meet China halfway, and earnestly implement the United States’ relevant promises,” the news agency said, without elaborating.

The world’s two largest economies have been embroiled in a tariff battle since July 2018, as the United States presses China to address what it sees as decades of unfair and illegal trading practices. (more…)

Beijing says US will not impose new tariffs on China exports

The U.S. will not levy new tariffs on Chinese exports, Chinese state media said after bilateral talks between Donald Trump and Xi Jinping on the sidelines of the Group of 20 summit in Osaka.

The world’s two biggest economies have agreed to restart trade talks, Xinhua news said, adding that the two sides will have discussions on “specific” issues.

The two leaders met for the first time in nearly seven months on Saturday, again on the sidelines of a global meeting, in an attempt to turn the heat down on a boiling trade war.

Trump is angry at the trade imbalance between the two countries, and has imposed rounds of tariffs on goods the U.S. imports from China. China retaliated by raising tariffs.

As the bilateral meeting began, Xi said he is prepared to exchange his thoughts and that he hopes to set the direction of China-U.S. relations “based on coordination, cooperation and stability.”

He added, “cooperation and dialogue are better than friction and confrontation.”

Trump responded by saying, “It would be historic if we can do a fair trade deal.”

“This could be a very productive meeting,” he said. (more…)

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