August 02 2019

Data- or Tweet-Dependent?

What caused this week’s market upset? Was it Boris Johnson’s jump-into-the-unknown Brexit? Was it the chaotic Democratic debate? Was it the Fed’s first-rate-decrease-in-4-years? Maybe Hong Kong ongoing protests? Oh I know, it was perhaps the shockingly low 0.8% eurozone growth in 2Q19, right?

No, it was just a 15-line tweet from @realDonaldTrump, pointing to yet another escalation in the trade war, despite ongoing talks. The greatest, and possibly sole, benefit of such post is that it hogs the limelight for team Trump ahead of 2020 elections, while casting clouds over all other news.

Tactically it is meant to pressure China into conceding to anything from agri-products purchase, to stepping down its world technological ambitions, and to see all these items encompassed into a single agreement. For one, China has learned from its past unequal treaty and a “century of humiliation” by Western powers, and is now using its regained economic and military clout to negotiate on a more equal-to-equal basis. Secondly, negotiating has a very different meaning in the Chinese world, focusing on building long-term relationships, rather than signing western-style Rousseau-like contracts. For the latter, it is quite possible that China and the US are not in fact pursuing the same goal.

What is achievable though is to have China step up to the new obligations of an emerged powerful economy. If we leave aside democracy for now, which is a key pre-requisite to welfare in western countries and a possible ideological hurdle for China, rising to the challenge of a fully-fledged new power would be to: further open-up its markets, playing a greater role in the resolution of world conflicts, collaborating to help out on world development, and pay lip service to climate change in a more meaningful way.

Collaborating more openly on technological projects, and agreeing on world privacy rules (taking the great GDPR as a template) is key not only to China but to the world’s advancement as well. What is certainly going against any form of progress is to tweet sarcasm from your tv-facing leather chair.

360 Advisory – Markets