US-China challenges will continue – Nordea

Tuuli Koivu, analyst at Nordea Markets, suggest that although the main emphasis of the US-China agreement is on increasing quickly exports from the US to China, and thus probably serves more Trump’s personal purposes than the US future economic development, the deal is not totally empty on the structural questions. 

Key Quotes

“There seems to be some progress especially on forced technological transfers. The promises on the intellectual property rights and opening up the financial sector seems to be more or less repeating China’s earlier commitments and as always, the implementation will be followed very carefully. Regarding the follow-up process, the US was able to push China to establish a bilateral body in order to resolve the disputes.”

“But of course most of the challenges will remain in place as the phase one deal falls short of removing most of the structural problems between the countries. China will keep developing further its economic model where the state (and the Communist party) plays a key role.”

“This path will certainly create increasing challenges between China and the Western counterparts, not just the US and we expect that there will be a continuous flow of measures hindering further cooperation especially from the US side. For example, the role of Huawei and 5G was not part of the Phase one deal.”

“However, the year 2020 is about the US presidential elections and the as Trump has also noticed one should not expect results from the Phase two negotiations prior to the US elections. Given that Trump can declare a victory after the Phase one deal, he does not want to rock the boat before November.”