Trump roils markets with comments on China trade, Huawei

Daniel Fowler
Августа 12, 2019

Ties between the world's two largest economies have deteriorated dramatically since Trump announced on August 1 that he would impose a 10% tariff on a final $300 billion worth of Chinese imports on September 1, prompting China to halt purchases of USA agricultural products.

Onshore spot yuan finished the domestic session down 0.1% at 7.0520 per dollar, its weakest such close since March 2008.

But there is "an terrible lot China can and should be doing" as part of that process, he said, including continuing reforms to open up more sectors of the economy, reducing impediments to trade and boosting consumption. "But if growth continues to slow, at certain point, the priority will shift to growth stabilization".

The U.S.'s labeling of China as a currency manipulator "signifies the trade war is evolving into a financial war and a currency war", and policy makers must prepare for long-term conflicts, Chen Yuan, former deputy governor of the People's Bank of China, said at a China Finance 40 meeting in Yichun, Heilongjiang.

The challenges aren't just from the dollar.

The International Monetary Fund said on Friday that it stood by its assessment that the value of China's yuan was largely in line with economic fundamentals. PBOC allows the local currency to fluctuate against the greenback within a narrow band of 2% from each day's midpoint.

"When you look at the Trump presidency, two and a half years into this presidency, 15 months until the election, and we're at this very unsafe juncture now where the tactics of the Trump White House are overtaking any semblance of a strategy", Goujon told Yahoo Finance's YFI AM on Friday.

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One of the PBOC officials at the meeting signaled that tensions with the US could increase.

According to the General Administration of Customs, China's exports increased 6.7 per cent year-on-year to 9.48 trillion yuan in the first seven months, while imports grew 1.3 per cent to 7.93 trillion yuan.

Auto sales - about one quarter of reported offline retail consumption - resumed contraction in July, data released last week show.

But the Commerce Department said on Friday it was still reviewing requests for special licenses for some sales to Huawei.

Analysts said trade tensions might diminish business and consumer confidence as well as tighten financial situations.

The M0 money supply, also called "narrow money", refers to coins and paper notes issued directly by the central bank, that are in circulation, and other money equivalents that can be converted easily to cash. However, the composition of China's foreign exchange reserves is more dispersed compared with the global average level, with the proportion of U.S. dollar-based assets below the worldwide average of 65 percent, which is actually not conducive to the stability of the yuan exchange rate against the dollar.

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