Image Trade war? International markets surge thanks to China [Lima Charlie News][Image: Johannes Eisele/AFP]
Trade war? International markets surge thanks to China [Lima Charlie News][Image: Johannes Eisele/AFP]

Trade war? International markets surge thanks to China

April 12, 2018
2 mins read

As international commodities, currency and trade markets worldwide continue to surge, US President Donald Trump, leader of the free world, may take credit. By all indicators, however, Chinese President Xi Jinping, the de facto leader of the unfree world, could in fact be responsible.

On Tuesday, President Xi gave an economic reformist speech at the Boao Forum in Hainan, China, that pledged not just to strengthen the protection of intellectual property rights in China, but to further open Chinese markets to international competitors. Xi, who stressed that this year marks the 40th anniversary of China’s reform and opening up, also vowed to immediately lower import tariffs on automobiles and foreign made steel products. Unlike the current US administration, which has somehow advocated both market protectionism and a free market, China appears to be putting its money where its mouth is.

[Xi address at the opening ceremony of the Boao Forum annual conference]

[Read: China Ministry of Foreign Affairs Release]

President Xi’s remarks and vows were positively received by world markets. The promise that an overt trade war was not in the immediate future boosted the US stock market, with the Dow Jones industrial average closing more than 400 points higher. European markets followed suit.

Peter Garnry, head of equity strategy at Saxo Bank in Copenhagen stated, “In the current environment markets are grabbing at the slightest hint. Today’s message from Xi contained nothing really new but it seemed like a conciliatory tone and so the market is just grabbing at that.” Societe Generale’s Kit Juckes stated, “Xi explicitly did not continue the trade war rhetoric so this is going to be risk-friendly and the market will be relieved.”

Yet, observers caution that Xi’s pledge this week is by no means a genuine effort to adhere to a free market. China remains just as big a protectionist bandit as the US. Rather, the move is part of the PRC’s longstanding approach to ensure that global economies cannot survive without a stable, autocratic China, while sticking it to US leadership by acting the part of the statesman to avoid an all out trade war. In actuality, China and the West remain engaged in a decades long covert trade war, something the mainstream media generally prefers to avoid.

While markets and exchanges have experienced a constant roller-coaster in light of recent trade issues between China and the US, a large part of these issues stem from a deep seeded disagreement over China’s proposed initiative, “Made in China 2025.” The campaign, issued in 2015, calls for a large push to Western markets of Chinese products and industries that stem primarily from IT, and include robotics, aerospace and aviation, advanced rail equipment, electric vehicles, agricultural machinery, and biopharmaceuticals. “Made in China 2025” is cited by Chinese officials as the first stage in a plan towards making China a global manufacturing power by 2049, 100 years after China’s communist revolution.

In response to such policies that “coerce American companies into transferring their technology and intellectual property to domestic Chinese enterprises” in exchange for market access, President Trump in March announced the US would impose tariffs on approximately $50 billion worth of Chinese imports. Industries affected by the tariffs would include aerospace, information and communication technology, robotics, and machinery.

With trade talks between the US and China having broken down, and China’s Ministry of Foreign Affairs stating Monday that it appeared impossible to negotiate, Xi’s recent statements may soften the dialog enough to allow for reconsideration.

Regardless, a quiver in Xi’s bow may still remain in play. As Bloomberg reports, China’s leaders are considering the potential impact of a gradual devaluation of the yuan.

John SjoholmLima Charlie News [Edited by Anthony A. LoPresti]

[Main Image: Johannes Eisele/AFP]

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