Chinese President Xi Jinping will attend a Russian-Chinese Energy and Economic Forum on the sidelines of the St. Petersburg International Economic Forum (SPIEF), Russia on June 7, 2019.
Maxim Shemetov | Reuters
China will not allow the US to interfere in the legislative process and economic policy, but it seems ready to keep its sales in the US markets on a steep and steady downward path.
According to published data, the US Department of Commerce announced on June 6 that Chinese commodity exports to the US fell 1
Although Chinese data was released on Monday morning, the Chinese surplus in US trade increased during the month of May, which was not directly comparable to US numbers due to different methods. Regardless, if Beijing wants to return to normal trade relations with Washington, the trend towards more balanced trade will and must continue.
In fact, the signal is clear that China has decided to make a radical change in its US trade. On an annual basis, China's US trade surplus in the January-April period would be 23.5% below the Chinese surplus of the whole of last year.
It is a pity that the US and China missed the opportunity to initiate such a reorientation of the bilateral trade balance when the Trump government took office in January 2017.
China's leaders were elected during the US presidential campaign in 2015 and 2016 Warned Donald Trump, if he became president, would not tolerate excessive and systematic Chinese trade surpluses in their US businesses. As the saying goes, China could read the writing on the wall.
China has finally taken a smart step
Why Beijing decided to tighten its US $ 901.7 billion trade surplus during the term of a government it was keen on Such trade developments are a mystery.
Washington may be forgiven for viewing Chinese behavior as a brazen provocation that requires a strong American reaction. And that's exactly what the US did by filing a commercial complaint that included intellectual property violations, forced technology transfers, illegal industrial subsidies, non-tariff barriers, limited access to American firms in Chinese markets, Beijing's exchange rate manipulation, and more.
In short, China was in a situation where the US called for far-reaching legislative changes in Beijing, and scrutinized monetary policy as a prerequisite for balancing trade accounts between the US and China and continuing fair, free, and reciprocal trade relations.
And when China resisted Washington's demands and continued to garner nearly a trillion dollars in US trade surpluses on Trump's watch, America stepped up its pressure through trade tariffs, taking an increasingly determined bargaining position and restricting Chinese companies' access to US markets and markets technologies.
Apparently, China ignored Washington's warnings, making things difficult. Beijing is now doing under duress what it should have done three years ago under much more favorable conditions if it really wanted to promote its policy of harmonious "great power relations." Emagazine.credit-suisse.com/app/art…7805 & lang = DE Chinese President Xi Jinping reported last Friday at an international economic forum in Russia, "It It is hard to imagine that the United States is completely separated from China or China from the United States We do not care That does not interest our American partners President Trump is my friend and I am convinced that he is not interested either. "
The Fed has plenty of room to support the economy.
A very welcome sea of change and a auspicious sign of Xi's meeting with Trump during the G-20 meeting in Osaka, Japan later this month.
China has decided at the highest level that a balanced trade relationship with the United States is under way the best in Interest in its economy, its weak security relations in Asia and the important role it wants to play on the world stage.
Such a policy always made sense.
As big as China's exports to the US are – $ 422.4 billion an annual installment in the first four months of this year – that's a small change compared to what its businesses can earn when they become focus on comprehensive programs that Xi calls "the great rejuvenation of the Chinese nation."
China's estimated 300-more than one million middle-class citizens represent a vast marketplace that offers ever more sophisticated products and services. And they now seem to be more interested in lucrative domestic investment, rather than shifting their millions overseas to trophy purchases.
The only thing I do not like about these new numbers in China in US trade is Beijing's drastically falling purchases of American goods. China's imports from the United States a miserable $ 34 billion from January to April, down 21% from the previous year, and only 24% of what China sold to the United States over the same period.
That must be change. Washington should insist that the settlement of bilateral trade accounts must significantly increase the volume of Chinese purchases of American goods and services.
In any case, markets can now confidently expect that the major realignment of trade flows between the US and China is finally underway
With the prospect of a trade war now virtually over, markets may well be on their toes sufficient liquidity supply to the Federal Reserve.
The Fed cuts its huge balance sheet – $ 3.3 trillion as of June 5, 2019 – still maintaining an extraordinarily large amount of the bank's excess reserves: $ 1.4 trillion in funds ready for banks to lend to businesses and households. And that's exactly what the banks are doing. Their loans to households accelerated during April at an annual rate of 6%.
The doomsayers should note that light lending and strong labor markets have kept the annual growth of US household spending (about 70% of GDP) at a level of 6%, 2.8% in the first four months of this year. This is an acceleration from the pace of the last four months, when consumer spending is traditionally high due to end-of-year holidays.
The trade problems with China are improving. China's excessive trade surpluses in US stores fell at an annual rate of 10% in the first four months of this year. According to current trends, this surplus could fall by 24% by the end of this year.
Markets can assume that the major Chinese trade problem has largely been removed.
The Fed, a much more important market driver, is maintaining extraordinarily simple liquidity conditions and sufficient scope to do more in an unlikely event of labor market slowdown, falling household incomes, and a continued decline in household consumption.
US equities remain among the best available global assets.
Comment by Michael Ivanovitch, an independent analyst focusing on the world economy, geopolitics and investment strategy. He was Senior Economist at the OECD in Paris, International Economist at the Federal Reserve Bank of New York and taught economics at Columbia Business School.