Risk sentiments appear to be weighed down by a Bloomberg report that indicated uncertainties over a comprehensive US-China trade deal. Unnamed Chinese officials was said have warned that “they won’t budge on the thorniest issues” regarding trade negotiations. Some officials have “relayed low expectations” on future negotiations unless US would roll back more of the imposed tariffs.
For now, US and China are still on track to complete the phase one of the trade deal based on original time frame, even though the APEC summit in Chile is cancelled due to social unrest. The phase one would cover intellectual property protections, currency, financial services and agricultural purchases. But both sides are said to recognize the difficulties for negotiations beyond that.
To our understanding, the most difficult part would be on subsidies on state-owned enterprises. US would insist on China to reduce the subsidies. But it’s a fundamental principle of the state capitalism model of China that the Chinese Communist Party wouldn’t give up. It’s the key difference between China and Westerns countries which made them systematic rivals, as many described.
