Following weakness overnight in Asia and Europe (not helped by reports from NYT last night that Trump was contemplating sanctions against Chinese officials for human rights violations), US futures were suddenly jolted from their dismal day by a headline from The Wall Street Journal suggesting Beijing backing off from the worst of the trade war rhetoric.
Chinese leaders are stepping up a charm offensive with U.S. multinationals and sheathing earlier threats of retaliation as Beijing changes tack to keep the trade fight with Washington from scaring off foreign investors.
Beijing is offering a reassuring message in its outreach to American companies. At a meeting last month, Liu He, President Xi Jinping’s economic-policy chief, told visiting American business representatives that U.S. companies’ China operations won’t be targeted in Beijing’s trade-brawl counterattacks.
“We won’t allow retribution against foreign companies,” Mr. Liu said, according to people briefed on the event.
And futures spiked (and extended the momentum gains through the US cash open)...
Whether or not China is shifting tactics is unknown as it becomes clear that it cannot continue to play tit-for-tat against America's superior position. But one thing is for sure, the sudden move to being "nice mercantilist" will further position Trump as the "bad mercantilist" in the eyes of many... WSJ notes that more wooing is likely this weekend.
Vice President Wang Qishan is scheduled to meet with a group of Wall Street tycoons including senior executives from JPMorgan Chase & Co., Citigroup Inc. and Blackstone Group . His message, according to a Chinese official, will be it’s business as usual.
The tone is a marked shift from a few months ago when the Trump administration began ratcheting up threats of tariffs on tens of billions of dollars of Chinese products, and Beijing vowed to retaliate dollar for dollar. Back then, Vice President Wang warned U.S. business chieftains there would be corporate casualties. President Xi told others that Beijing would “punch back” at the U.S.
Now Chinese leaders are turning the cheek out of deepening concern that the spiraling trade battle could batter the economy and investment seen as critical to China’s future, according to other officials and government advisers.
It’s “logical that they wouldn’t kill the goose that lays the golden egg,” said William Zarit, a business consultant and chairman of the American Chamber of Commerce in China.
Offshore Yuan also bounced on the report...
However, Beijing isn’t abandoning retaliation.
It has promised to impose tariffs on $60 billion in American goods if the Trump administration moves ahead in the coming weeks with penalties on $200 billion in Chinese goods on top of the $50 billion already being hit with 25% levies. China’s plans would bring the total amount of U.S. imports potentially subject to Chinese tariffs to $110 billion - or 85% of U.S. goods entering China last year.
“It doesn’t take a central government directive for a local official to sense which way the political winds are blowing,” said Jacob Parker, vice president of China operations at the U.S.-China Business Council.
As WSJ concludes, China’s tit-for-tat strategy, originally devised to force Trump officials back to the negotiating table, so far has failed to pay off for the leadership.
Beijing is looking to U.S. companies to help it lobby the Trump administration for a negotiated settlement.