China Markets peter navarro

China In The Spotlight Amid Rising Tensions, Crucial Data, Burgeoning Stock Bubble

Let us hope that Peter Navarro’s comments to Fox News on Sunday aren’t indicative of what kind of week it’s going to be on the geopolitical front.

“If TikTok separates as an American company, that doesn’t help us”, Navarro insisted, during a characteristically inflammatory diatribe. Trump is “just getting started”, he added, warning that the administration is poised to take “strong action” against the popular app, as well as WeChat for what he called “information warfare” against the US.

Trump and Mike Pompeo suggested last week the US may ban TikTok, in yet another incremental escalation in “Cold War 2.0”, which isn’t going to end no matter who occupies the Oval Office.

Read more: ‘Cold War 2.0’ Isn’t Going To End. No Matter Who Is President

Although Joe Biden may well take a different approach when it comes to confronting Beijing, “blame China” is a rallying cry with bipartisan appeal. It is by no means clear that a Biden administration would “take it easy” on the Chinese, especially given the necessity of retaining at least some of the populist appeal which resonated with supporters of Elizabeth Warren and Bernie Sanders.

Of course, to let Navarro tell it, Biden sits on the Politburo. “Joe Biden is the candidate of the Chinese Communist Party”, he charged, before regaling America with his theory about COVID-19.

“We were cruisin’ along until the Chinese hit us with that deadly weaponized virus”, he told Fox. He then said China had a “down economy” last year, without specifying what that meant. China’s economy expanded at nearly three times the rate the US grew in 2019.

 

To be clear, Navarro’s remarks aren’t always worth mentioning, but they are right now for two simple reasons.

First, relations between the administration and China are the worst they’ve ever been and, on Friday, Trump essentially admitted that Navarro was not misinterpreted late last month when he declared the trade deal between the world’s two largest economies dead.

While the president didn’t go so far as to concede that China won’t be making good on its commitments under “phase one” of the agreement, he did say that “phase two” isn’t likely to proceed anytime soon. With just over six months left in 2020, the math doesn’t look good for Beijing hitting the mark on its year-one purchase quotas, which means the first phase isn’t really operational either.

On Thursday, the US sanctioned Chen Quanguo, party secretary in Xinjiang. It was the highest-level sanction ever dealt in the country, US officials said. Meanwhile, deliberations are ongoing as to how the administration plans to punish China for the implementation of the new national security law in Hong Kong. Last week, reports indicated that at least some lower-level officials have floated the notion of undermining the Hong Kong dollar peg, a ludicrous suggestion that analysts and economists described as a “wacky idea“.

Against this exceptionally fraught backdrop, Navarro likely has carte blanche to push the envelope, especially as everyone on both sides of the aisle jostles for position to see who can be “toughest” on China ahead of November.

Second, China reports Q2 GDP as well as June activity data this week. China’s economy of course posted an unprecedented 6.8% contraction in Q1. Economists are looking for a 2.5% expansion in Q2.

In May, Beijing abandoned its GDP target for 2020.

April marked the first on-year gain for industrial output since the epidemic began, and May’s numbers showed a further uptick. Retail sales, though, remain subdued, a sign that domestic demand is sluggish even as factory output has improved.

Beijing dealt swiftly (and adeptly) with a COVID outbreak tied to a food and vegetable facility in the city last month. Analysts don’t generally see that having a material impact on the figures due this week.

PMIs in China have rebounded sharply. In fact, the Caixin services gauge rose to 58.4 for June, the highest since April 2010.

Meanwhile, Chinese officials will need to decide what message to send to retail investors after a stunning rally tacked more than $1 trillion onto the country’s equity market in the space of just a handful of sessions this month.

After initially encouraging the mini-mania, Beijing appeared to have second thoughts by the end of the week. On Friday, state media tried to throw a bit of cold water on the surge, which had already drawn comparisons to the country’s infamous 2014/2015 boom and subsequent bust.

This is all crucial to the geopolitical and macro narratives.

So, in addition to the evolution of America’s rapidly worsening epidemic, big bank earnings, and a set of possibly useful data points in the US, investors and traders will need to keep one eye on China this week.

As for Navarro, he’ll have both eyes trained on Beijing, as is his wont.


 

15 comments on “China In The Spotlight Amid Rising Tensions, Crucial Data, Burgeoning Stock Bubble

  1. It is shocking and frightening that an adjunct professor from some jerk-water UC campus is driving the future of the most important geopolitical relationship in the 21st century. #MAGA

    • My characterization of UC San Diego as a “jerk-water campus” may have been unfair. But Peter Navarro? God help us.

  2. Remember that the rest of the world views Trump and his cohorts as some soap opera idiots. You just can’t make this stuff up. China, hopefully, is waiting until saner minds are back in control of the US government before they decide what their own actions will be.

  3. Though Trump and his associates as usual lack subtlety and polish, their gist here is correct. China is an ideological enemy. They are a totalitarian police state and their citizens have almost no rights if they get on the wrong side of the state. The hopes of more sophisticated Presidents, both Dem and Rep,that China would become less authoritarian and menacing to its neighbors as its economy liberalized were badly wrong. Say what you will about Navarro, but just be glad that you’re not a citizen of China…

    • Sorry, your comment is just hawkish right-wing blather. China is much less of a totalitarian police state than it was under Mao, and it is no more menacing to its neighbors than it has ever been, in that the boundaries of “greater China” have always been fluid and have more to do with geography and resources than ideology. It is true that China is reasserting itself in familiar ways across Asia — and why shouldn’t it, as the oldest, largest state in the region, going back thousands of years — but that has less to do with communism and a whole helluva lot more to do with Western multinationals pouring trillions of dollars into China’s industrial base in an effort to screw unions in this country and pump up their bottom lines. I think most Chinese in 2020 have access to better health care, education, and a future than most Americans, and I wouldn’t be as smug as you are in thinking otherwise.

      • They have a police state, we do not. Any territory they gain will also become a police state. See Hong Kong. I guess any viewpoint you don’t agree with is “blather”. That may feel good to you, but it doesn’t hold any logical weight. And “right-wing” is just an insult designed to silence people you don’t agree with.

        However, I agree with you wholeheartedly that our greed played a large role in empowering a very dangerous regime. I should have been more clear. My bone is not with China as a people – it is with the nasty authoritarianism of the CPC. As you state, China always has been and always will be a major player in Asia, and rightfully so…

        • In the spirit of reasoned debate. Certainly, you would agree that the U.S. — with its lurch over the last thirty years to to mass incarceration of people of color and poor people and the recent hideous militarization of police forces across the country — looks more line a police state than it ever has. I’m 63,, and it cetairntly looks that way to me. And as for your objection to China moving on Hong Kong (which we knew was coming when the Brits agreed to leave, and which I don’t condone), how is that different than our Gulf War I (Kuwait, the second biggest gas station in the world) or Gulf War II (Iraq, the third-biggest gas station in the world)? i’m not trying to silence or insult you by labeling your views “right wing,” but the casual use of terms like “totalitarian” and “communist,’ without any kind of context, just seems like lazydog-whistling.

          • Heis. Please add an edit button to your comments section. Thank you.

          • I acknowledge that we have big problems in our nation, and some (like the wealth inequality mentioned frequently on this site) are getting worse. Joe Biden calling out corporations on their “shareholder capitalism” indicates that he is at least aware of some of the problematic dynamics. I hope he will engage Trump along those lines this fall.

          • You’ve got that right. When we start arguing about which countries are more righteous, the US stands on one leg at best. The Chinese have not forgotten about the British and Americans pumping their citizens full of the Jesus drug (heroine) in order to steal as much of the country’s wealth as possible.

      • Trump and his acolytes couldn’t care less about Chinese ideology or human rights abuses. The same goes for the majority of American politicians. Tensions between the US and China are largely driven by geopolitical and economic rivalry. If American policy was primarily motivated by universal freedoms and human rights (including the alleviation of wars and famine) a great deal more pressure would be applied on allies such as Egypt, Saudia Arabia and Israel.

        While you and I may be glad to not be Chinese citizens, it is worth pointing out that the average Chinese citizen views their government through a much different lens than American observers. Given the effectiveness of Chinese state media (propaganda as well as censorship) they also view the US and its citizens differently. Incidentally, the fact that you appear to lionize Navarro’s over-the-top narrative suggests that American propaganda resonates with some people as well, no matter how ham-fisted.

        The reality is that with the exception of periods of instability and upheaval, China has been a bureaucratic police state of one sort or another since the country was unified by Qin Shi Huang over 2240 years ago. One may be excused for concluding that this may, in fact, have been (and still is) perceived as a necessary precondition to maintaining internal stability. Certainly, China’s history as a republic between 1912 and 1949 does nothing to refute the argument. Additionally, after the Mao-inspired tragedies of the Great Leap Forward and the Cultural Revolution, the CPC has been (and continues to be) seen as an effective manager of the country’s development, systemic human rights abuses not withstanding.

  4. By the way, here’s the funniest thing I heard this weekend: Some paleo/white supremacist GOPers are floating the idea of Tucker Carlson for president in 2024. #YouCantMakeThisStuffUp

  5. is peter navarro still going to be relevant after the Nov elections ?

  6. China: wipe out the “One contry/two system” fiction and gulps Honk Kong
    USA: Gosh, we must do something! Yeah, let’s ban TikTok.
    China: oh!

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