Chinese stocks crumbled Friday, diving nearly 3%, a slide some attributed to acrimony during high-level talks with US officials in Alaska.
Blame-casting and name-calling in Anchorage marked an inauspicious start to Sino-US relations under Joe Biden, although it’s difficult to imagine how things could possibly get much worse than they were under the previous administration.
Antony Blinken suggested China isn’t committed to a “rules-based order” in the world, and China not-so-gently reminded Blinken that some Americans have had it with racial injustice and myriad societal inequities. “Many people [in America] actually have little confidence in the democracy of the United States,” Politburo member Yang Jiechi chided.
Blinken and Jake Sullivan said the US is “lookin[ing] hard at its own shortcomings and seek[ing] to improve,” an effort they said is the hallmark of “a confident country.”
Notably (and ominously), Chinese delegates told Blinken that the US “isn’t qualified to speak to China from a position of strength.” He also said US efforts to “strangle” the Chinese people have failed. (So much for the notion that four years of economic warfare would break their spirit.)
In any event, Chinese stocks aren’t “speaking from a position of strength,” that’s for sure. In fact, they’re now riding a five-week losing streak, the longest in a half-decade. Call it “five for five.”
Despite economic outperformance, China has struggled to keep a floor under the equity market of late, with state efforts to stanch the bleeding falling short earlier this month.
It’s not clear why anyone would be surprised that Sino-US relations remain tenuous. Regardless of your partisan bent, it’s undeniable that Trump left Biden with an extremely contentious dynamic. The former president made diplomacy even more difficult by telling voters Biden would be a puppet for Beijing. Some reports indicated the outgoing administration deliberately escalated hostilities in the final weeks of the Trump presidency to lock Biden into a hardline position. (Remember the de-listing fiasco?)
Xi’s increasingly assertive stance in Hong Kong (including and especially this month’s decision to stamp out the last vestiges of democratic governance in the city) raises the stakes, as does America’s position on Taiwan.
But it’s not all about geopolitics for Chinese equities. Investors are concerned about relatively tight monetary policy, worries that were arguably exacerbated by the below-consensus growth target unveiled two weeks back. Jitters on Wall Street aren’t helping, and neither is Beijing’s crackdown on big tech. Some worry Tencent is poised to get the Jack Ma treatment. And then there’s Kweichow Moutai’s troubles.
It all adds up to consternation around mainland stocks, which overseas investors were net sellers of on Friday for the first time since March 8.
It’s probably a mistake to read too much into the Alaska mini-debacle. After all, there really wasn’t an agenda, so to speak. Biden spent his first two months in office figuratively (i.e., economically) and literally inoculating US citizens against a virus which was raging unabated just three months back. While relations with Beijing are obviously a top concern, stopping the spread of COVID took precedence.
Without an actual agenda, diplomats were left with little else to do in Anchorage other than enumerate long lists of grievances, some extraordinarily serious, some exceptionally petty.
“What is typically a few minutes of opening remarks in front of journalists for such high-level meetings lasted more than an hour, and the two delegations tussled about when media would be ushered out of the room,” Reuters recounted, adding that “afterwards, the US accused China of ‘grandstanding’ while Chinese state media blamed US officials for being ‘inhospitable’ [and] both sides accused the other of violating diplomatic protocol by speaking too long in opening remarks.”
All that was missing was a Peter Navarro cameo, a Wilbur Ross nap and a Mike Pompeo soundbite.