December 4, 2019
U.S., China Move Closer to Trade Deal Despite Harsh Rhetoric
“The U.S. and China are moving closer to agreeing on the amount of tariffs that would be rolled back in a phase-one trade deal despite tensions over Hong Kong and Xinjiang, people familiar with the talks said. The people, who asked not to be identified, said that U.S. President Donald Trump’s comments Tuesday downplaying the urgency of a deal shouldn’t be understood to mean the talks were stalling, as he was speaking off the cuff. Recent U.S. legislation seeking to sanction Chinese officials over human-rights issues in Hong Kong and Xinjiang are unlikely to impact the talks, one person familiar with Beijing’s thinking said. U.S. negotiators expect a phase-one deal with China to be completed before American tariffs are set to rise on Dec. 15, the people said. Outstanding issues in the talks include how to guarantee China’s purchases of U.S. agricultural goods and exactly which tariffs to roll back, they added. U.S. Trade Representative Robert Lighthizer’s office didn’t respond to a request for comment. China’s Ministry of Commerce didn’t immediately respond to a fax seeking comment on tariff rollbacks. When asked in Seoul about whether the trade talks can be finished this year, China’s Foreign Minister Wang Yi said, “it depends. China’s stance is very clear. There is hope, as long as it is based on mutual respect and equal consultations,” according to Phoenix TV.”
British Pound Touches Highest Since May in Vote for Conservatives
“The pound touched the highest level against the euro since May 2017 as traders stepped up bets on a win for the Conservatives in next week’s election. It advanced against all major peers as polls showed the ruling Tories holding their lead over Jeremy Corbyn’s left-wing Labour Party. Sterling reached the highest against the dollar since May as U.S. President Donald Trump’s visit to the U.K. unfolded comparatively smoothly, defying speculation his presence could undermine Prime Minister Boris Johnson. Investors see a Conservative majority on Dec. 12 as the most market-positive outcome, as it would allow Johnson to push his Brexit deal through Parliament in time for next month’s deadline and move on to the next phase of talks with the European Union. Trump’s visit had been seen as a risk for the Conservatives, who face questions over how the National Health Service would fare in any future trade deal with the U.S. “With just over a week to go, sterling remains highly influenced by the polls day-to-day, but we may also be seeing some relief that Trump did not toss a grenade into the U.K. political system during his remarks,” said Ned Rumpeltin, European head of currency strategy at Toronto-Dominion Bank. “A break above the October high at $1.3013 may open the door for a test of $1.3185.” The pound gained as much as 0.6% to $1.3073, the highest since May 8. It rallied as much as 0.7% to 84.71 pence per euro, the strongest level since May 2017. The currency has acted as a barometer of political risk throughout the Brexit process and has recovered about 9% against the dollar since hitting an almost three-year low in September, on hopes of an end to the uncertainty. Although the U.S. President’s visit has so far passed without incident, it’s not over yet. Johnson and Trump will both speak at the end of the NATO summit later Wednesday, at a delicate moment amid tensions among the international allies. Royal Bank of Canada sees a 60% chance of a Conservative majority next week, leading to the “near certainty” of Brexit at the end of January on the terms of Johnson’s deal.”
Foreign Direct Investment Into China Jumps Despite Trade War
“Foreign direct investment into China jumped last year to $139 billion even as trade tensions escalated, bucking a trend that saw global flows sink 13% from 2017 levels. While global foreign direct investment declined to $1.3 trillion last year, inflows into China rose 3.7% from 2017, according to a report Wednesday from the United Nations Economic and Social Commission for Asia and the Pacific. The report also showed that for the fist time, Asia-Pacific was both the largest destination and source of foreign direct investment globally, with China remaining the biggest recipient of inflows despite the trade war with the U.S. Foreign direct investment into China jumped last year to $139 billion even as trade tensions escalated, bucking a trend that saw global flows sink 13% from 2017 levels. While global foreign direct investment declined to $1.3 trillion last year, inflows into China rose 3.7% from 2017, according to a report Wednesday from the United Nations Economic and Social Commission for Asia and the Pacific. The report also showed that for the fist time, Asia-Pacific was both the largest destination and source of foreign direct investment globally, with China remaining the biggest recipient of inflows despite the trade war with the U.S. “As it takes time for businesses to diversify their capacity outside of China in order to respond to the trade tensions, the longer the trade war between the United States and China continues, the higher the probability that there will be a slowdown in inward FDI,” the report said. The report also cautioned that sluggish growth in inward greenfield investment may hamper Asia-Pacific’s ability to maintain such levels of investment in the near term. “A decline in investment flows in 2020 is expected if both the uncertainty related to international trade continues and companies consolidate their value chains,” the report said. “Investment prospects for the region remain tied to unfolding risks of ongoing global political and economic disturbances.”
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