A phase-one trade agreement has been confirmed by officials in both Washington and Beijing on Friday.
The deal includes China’s commitment to buy at least US$40 billion worth of US farm goods annually, tighten intellectual property rules, ban forced technology transfers and to avoid competitive currency devaluation.
On the US front, the concessions include halting new tariffs and to scale back tariffs from September on US$120 billion Chinese goods from 15 percent to 7.5 percent. There are still however, 25% tariffs on about US$250 billion imports, which amount to nearly half of all Chinese shipment to the US.
US chief trade representative Robert Lighthizer said ‘There are a lot of hard things left over…’, perhaps referring to the deeper and tougher issues such as state subsidies, structural reform and cyber securities. A partial deal signed is a major breakthrough in the 20-month long negotiation. However, it is perhaps only the prelude of a long-term US-China confrontation.
Asian markets had a ‘relief rally’ from the clearance of UK election risks and trade risks on Friday. The favourable sentiment could carry through into the year end as more global investors become bullish on emerging market (EM) assets next year.
A survey conducted by Bloomberg suggest that US-China trade issues and China’s economic growth outlook are among the top two drivers of EM performance next year.
Today, China’s industrial production and retail sales figures are under the spotlight. Markets expect both figures to rebound slightly from October levels to reach 5% and 7.6% respectively. However, even by this optimistic forecast, these readings are still likely to mark the slowest pace of growth in China’s industrial and consumer markets.
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Margaret Yang Yan