Mr. Chandler nails a very important point regarding yesterday's "China Gives Biden Administration Two Lists Of Demands".
President Xi knew that publicly giving Zho Bai Dan a "to-do" list would not be well received in the U.S. and would tend to harden the resolve of those in the administration who are advocating a more bellicose (realistic?) approach to Sino - U.S. relations. So why do it?
It seems the government and party are trying to distract the attention of the Chinese people. There's something going on on the home-front that has the politburo a bit worried. But I for one don't know what it is.
From Marc to Market:
Overview: It is not China's aggressive foreign policy that is the source of the disturbance in the capital markets, but its aggressiveness at home as it asserts control parts of the tech sector and toughens its anti-trust efforts. Hong Kong shares are bearing the brunt. The Hang Seng has fallen by 10% in the three sessions, including today. The Shanghai Composite is off nearly 5.5% in the same period. A few of the other larger markets in the region, including Japan, South Korea, and Australia, posted small gains. Moody's affirmation of a stable credit outlook helped lift Philippines' stocks by 2.4%, the most in a couple of months and recouped most of Monday's slide. Europe's Dow Jones Stoxx 600 is off around 0.5%, led by financials and energy. US futures are trading with a heavier bias. Benchmark bond yields are lower. The 10-year Treasury yield is hovering near 1.25%, off more than three basis points. European yields are 1-2 bp lower. The dollar is bid. The yen continues to be resilient. Emerging market currencies are retreating as an expression of the risk-off mood. The JP Morgan Emerging Market Currency Index is off 2%. Industrial metals have been knocked back by reports suggesting China is considering new export tariffs on steel. Oil is sidelined, and the September WTI contract is little changed, around $72 a barrel. Gold is not drawing much of a bid. A stronger dollar may offset the lower yields as a consideration. If the yellow metal does not recover, it may close below $1800 for the first time in three weeks.
Asia Pacific
Beijing is fighting a two-front battle. Domestically, the new drive that began last year with the Ant IPO and crackdown on Alibaba has broadened. Stronger regulatory efforts, anti-trust, and IPOs in foreign markets, and now private education companies are killing the proverbial goose that lays the golden egg by underscoring international investors' concerns about investing in China. The capital inflows were to create conditions under which Beijing could ease capital outflow restrictions. The other front of the battle is in foreign policy. Yesterday's high-level meetings with the US appeared to have failed to break new ground. While reports suggest that there is still scope for Biden and Xi to meet in October, with the March and July contentious meetings, the chances of an agreement seem remote.
Reports today suggest China is considering a 10-25% tariff on steel exports starting in Q3 to rein in the sector. This is separate from its regulatory initiatives. This seems more in the containing commodity prices and rationalizing the steel sector. It appeared to have an immediate effect of sending iron ore and steel rebar prices lower. However, nickel, which is needed in the new batteries, proved resilient and is at new multi-year highs. Separately, China reported industrial profits moderated to 20% year-over-year from more than 36% in May....
....MUCH MORE
The writer's graphic for this post is rather ominous, though as they say in Hollywood, perhaps a bit too "on-the-nose":
