Hello from Hong Kong, the 7-day average number of new coronavirus cases is still rooted in the low single digits, and the humidity is still rooted in the high double digits.

Our main content today is about Sino-US relations. As tensions seem to worsen, what impact will it have on trade?

Concession waters View the latest shipping rates for shipping containers from East Asia to Northern Europe.

Despite increased trading activity, tensions continue to increase

Only Tuesday, Sino-US relations have been a rough week.Yesterday, the former accused the latter of treating it as “imaginary enemy” middle Talks between senior officials in the northern city of Tianjin.

At the same time, in the financial sector, the stocks of Chinese education companies listed in the United States after Beijing plummeted New regulations introduced Profit-making operations of after-school tutoring companies and foreign investment are prohibited. A few weeks ago, American investors invested in the ride-hailing company Didi Chuxing. Blinded by China’s regulatory intervention Following the listing in New York at the end of June.

But for now, signs of stock market decoupling and geopolitical tensions are tied with recent trade data between the two countries. Although the trade war launched in 2018 has led to a series of tariffs and restrictions, China’s exports to the United States have still hit a record high in the past year.

If tensions continue to worsen, can this trade dynamic continue to exist?

At least in the short term, the same type of coronavirus that has exacerbated mutual hostility between the two countries also helps the two countries’ trade relations. China’s rapid recovery from the pandemic early last year allowed it to shift its focus on manufacturing machinery to the production of more sought-after goods during the pandemic. This includes not only masks and other personal protective equipment, but also sales of household appliances and electronic products in Western consumer markets, where governments have responded to the crisis through stimulus measures.

In dollar terms, China’s exports in June grew by 32.2% year-on-year, and each month this year they grew at a double-digit rate, partly due to the base effect compared to the activity collapse in the first half of 2020. But it was too late last year. Compared with 2019 before the pandemic, China’s exports grew rapidly.

Economists believe that this relationship may have reached its peak. According to Julian Evans-Pritchard, chief China economist at Capital Macros, Suggestions of the month “As consumption patterns begin to normalize during the reopening period, the surge in retail sales in developed economies caused by the pandemic has recently begun to reverse.”

“Once retailers in these countries rebuild their inventory, weak consumer demand will lead to a weakening of foreign demand for Chinese exports,” he added. Nomura’s Ting Lu predicts that China’s economic growth will face downward pressure in the second half of the year, partly because of weak exports as other markets shift to service consumption that is severely restricted by the lockdown measures.

Others pointed out that although China’s trade relationship with the United States has been helped by the pandemic, it is not as good as it should be. Adam Slater of the Oxford Economics Institute estimates that US imports from China are still down by about 20% based on expectations for trends in 2009-2018. From 2018 to 2019, the average U.S. tariff on Chinese goods increased by 15%.

From a policy perspective, the trade trajectory is not entirely negative, and partly depends on the sensitivity of the sector. After reaching a trade agreement at the end of 2019, the United States has increased its activity in certain industries in China, especially the role of its largest company in the financial services sector, as the latter is building its investment market. At the same time, China’s recent educational transformation will greatly reduce foreign participation in the industry.

Slater simulated a scenario where trade decoupling only occurs between China and the United States, or between China and other developed economies in the world, including Western Europe, Japan, South Korea, Taiwan and the United States, Mexico and Canada.

He found that in both cases, the blow to China’s GDP would be far greater than the blow to US GDP. However, contrary to the tensions between the Soviet Union and the United States for most of the 20th century, he pointed out that China is becoming more deeply integrated into the global economy—as its export dominance throughout the pandemic has shown.

He concluded that the governments of most advanced economies and potentially broadly decoupled allies of the United States “may be reluctant to reduce their economic engagement with China.”

Concession waters

Since the beginning of the pandemic, container freight rates on major routes from Asia to Europe and Asia to the United States have soared. Nothing is more striking than the rate hike on the route from East Asia to Northern Europe.

Data from Xeneta, which specializes in freight information, shows that the cost of transporting 40-foot containers is now close to the highest level in history.

U.S. President Joe Biden recently tried to curb the increase in transportation costs (though not specifically for shipping) for U.S. importers. The question now is whether European leaders, where many of the world’s major shipping companies are located, will follow suit. Claire Jones

Trade ties

Britain is Consider relaxing restrictions exist Travel from the European Union and the U.S., To promote tourism and help the UK reopen for large-scale foreign travel.However, U.S. concerns about the Delta variant of the coronavirus remain Resist back and forth.

at the same time, Singapore hope Relax border restrictions In September, 80% of the country’s 5.7 million population should be fully vaccinated (Nikkei, USD, subscription required).The United States is urging countries Support creation of Low-cost manufacturing center Vaccines to deal with the problem that most developing countries cannot obtain vaccines.

In-depth study of the latest Chartbook from the excellent Adam Tooze World Bank Report Interpretation since the early 1980s Why China can ensure rapid growth In the next few decades.

at last, Intel An ambitious goal is being set to produce the most Advanced 20A semiconductor Within two years Regain the global chip manufacturing crown By 2025 from TSMC and Samsung (Nikkei, $).