US-China relations are built on a fragile web of complex issues. Recently, we’ve seen headlines about technology, sovereignty and human rights flare up, and the Phase 1 trade deal review has been delayed indefinitely. Here, I review these flashpoints and how they could affect US-China relations.
In China, pork prices are up 70% (!) year over year. A swine fever outbreak has crippled the pork industry and caused a surge in pork prices. Pork prices are a main driver of China’s Consumer Price Index (CPI) increase. CPI inflation could reach 4% by year-end, one percentage point above the People’s Bank of China’s 3% target.
On August 5, 2019, the US dollar-Chinese yuan (USDCNY) exchange rate broke above 7.0 yuan to the dollar, an important threshold for many market watchers. Not surprisingly, China and the US had very different takes on the CNY weakness.
For years, President Trump has accused China of purposely devaluing the renminbi to boost exports. With trade and political tensions boiling over, the question of whether China will devalue the renminbi often comes up.
China’s 19th Communist Party Congress is fast approaching. While the meetings are primarily a political event, they will shed some light on the party’s broad economic goals. There will also be major reshuffling across party leadership this year.
Has China’s renminbi unseated the Japanese yen as the new “safe haven” currency in Asia? Some market commentators have adopted this view given the renminbi’s recent strength, intensifying geopolitical tensions in Asia and Japan’s proximity to North Korea.