Trump Hits China With Stiff Trade Measures
There are reports and indications that the Chinese leadership is &#x27;okay&#x27;, possibly even inviting of this move and may respond only lightly to save face.<p>- Xi knows the Chinese economy must rebalance for domestic reasons and that excess capacity must be shed. The US move provides Xi political cover and fallguy as the inevitable unfolds.<p>- Chinese investors are eager to invest more in US assets and companies. Through the trade negotiations to come the US is likely to open its doors to greater Chinese investment as Chinese doors open to less or unrestricted investment from the US. This may take the form of sole US-owned investment, an end to technology transfers, or both.<p>- Xi&#x27;s power consolidation was widely reported as the product of ambition. The alternative explanation, and the one I favor, is the inevitable rebalancing of China&#x27;s economy will necessarily cause some social and political instability - at all levels of the Chinese body politic. Whereas social and political pressure has forced policy retreats the past decade in China, Xi&#x27;s new power suggests he&#x27;ll enjoy the authority and longevity necessary to complete China&#x27;s adjustment. Suggests only, a lot can go wrong.<p>- China has much to do in supporting provincial governments, SOE, and other systemically important institutions. I don&#x27;t think China has sufficient reserves in-place for a trade war, even if it were so inclined.