It’s an eventful week in Asia, as Malaysians decide the fate of incumbent Prime Minister Najib Razak, the Philippines gets set to tighten rates and US-China trade talks either reduce or refuel risks to the region's export-led growth
China’s activity data for April will shed light on the economy’s performance coming into the second quarter of the year, while the trade war clouds the outlook. After underperforming in 2017, China’s exports have performed well so far this year. The 13% year-on-year export growth in 1Q18 was the third best after Vietnam and Malaysia. The consensus of 8% growth in April indicates some tapering of the strength.
Will the US Treasury Secretary's mission to China bear fruit? There is scepticism stemming from President Trump’s “walk out” threat if talks don’t move in the US's desired direction. Hopefully, we should have some clarity on this before the weekend. The outcome of trade talks, rather than hard data, will set the tone for both Chinese and global markets in the coming week.
Hong Kong GDP for 1Q18 and Taiwan trade and inflation are other data releases from Northeast Asia.
We expect no material change in the current deadlock between China and the US over trade
The world is focusing on Liu He, economic adviser to Xi Jinping, as one of the negotiators in bilateral trade talks with the US. But this time the spotlight should be on Wang Qishan, the firefighter of China, now the vice president who has "unlimited" tenure with Xi Jinping. Wang's return to the government with this very important role is not only to continue the anti-corruption campaign, but also to deal with the new Sino-US relationship.
We expect that Wang will only offer what China has already announced - opening up the financial markets and cutting tariffs on imported automobiles.
If the US withdraws tariffs then China will also withdraw tariffs. We believe the chances are low as this would not change the overall trade deficit of the US economy. And, in fact, China alone could not change the US's trade deficit position.
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