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  1. Home
  2. / Investing
  3. / Stocks

China's Silence Makes It Clear There's No Trade Deal at All

Stock markets have rallied on the "Phase 1" agreement reached with China, but the optimism is misplaced, with no mention of any trade deal whatsoever from the Chinese side.
By ALEX FREW MCMILLAN
Oct 14, 2019 | 07:30 AM EDT

Investors shouldn't be hoodwinked by U.S. claims that it has struck a deal on trade with China. It hasn't.

The Chinese take on what happened with the latest round of talks, which ended on Friday, is revealing. There's no mention whatsoever of the "Phase 1" agreement that U.S. President Donald Trump claims has been struck. No mention of China buying $40 billion to $50 billion in U.S. farm goods at all.

In fact, according to the Chinese side, basically nothing has changed. "Progress" is as far as they'll go.

The Chinese yuan and mainland Chinese stocks are rallying on Monday, notes The Global Times, the newspaper that's the mouthpiece of the Communist Party on foreign policy. China is winning, in other words.

China's official news agency, Xinhua, notes only that "substantial progress" was made during two days of talks. It even pins its story around the fact that "U.S.-based observers" have "welcomed the progress," dredging up sunny insights from the marketing director of the Iowa Soybean Association. Xinhua quotes a text message from a Georgia farmer who is "glad they are talking progress," and that "U.S. beef producers would love to see the Chinese people with all the beef they want."

No deal mentioned. The topics of agriculture, intellectual property rights, exchange rates, financial services, expansion of trade, technology transfer and dispute settlement came up. That's it.

Xinhua has swiftly moved on by Monday to the great success Chinese President Xi Jinping is apparently having during his trip to Nepal and India. China and India "pledge to enhance economic ties," while "China, Nepal pledge to elevate partnership."

A lot of pledging, apparently. No U.S. deal mentioned. Oh and for good measure, Xi warned that anyone attempting to split China (that's you, Hong Kong, Taiwan, Xinjiang, Tibet) will be "crushed" and any "external force" backing such attempts (that's you, Ted Cruz) "will be deemed by the Chinese people as pipe-dreaming."

The lead business story is that China's pork imports are surging, as the country battles to handle the African swine flu epidemic. Nothing on U.S. trade talks at all.

There's been a stock market rally after Trump announced that the United States will suspend tariffs that were due to rise next week to 30% on $250 billion in Chinese goods. There's another batch due to go into effect on December 15.

I'm looking at a field of green on Asian equity markets on Monday. The CSI 300 index of the largest listings in Shanghai and Shenzhen is up 1.1% in afternoon trade, leading the gains. Stocks from South Korea, one of Asia's most export-dependent economies, are up a similar amount.

They are duplicating gains for U.S. stocks on Friday, when the S&P 500 rose 1.1%, and ended with its first weekly gain for a month.

This optimism is going to last as long as an NBA tweet. The truth is that the talks, again, have led nowhere, and Trump is desperate to announce some sort of progress when the discussions concluded in his Oval Office.

I would advise anybody who does business of any sort with either Trump or Xi to get it in writing. In fact, I'd advise them not to do business with those people at all.

It's clear there's nothing in writing. Only Trump has trumpeted the "$40 billion to $50 billion" in farm goods that China has supposedly agreed to buy. No one in China has mentioned those figures whatsoever.

This is a repeat of the claim that Trump made in July, when he and Xi met at the G-20 meeting in Osaka. Again, Trump insisted that "they are going to buy farm goods," while the Chinese side made no mention of any deal, just that agricultural trade "is an important issue for both sides to discuss," in the words of China's Commerce Ministry spokesman Gao Feng.

It's now apparent that Trump wants to sign something or other with Xi when they meet in Santiago, Chile, in November. But he isn't too confident about that. The deal will "take probably three weeks, four weeks or five weeks," he said, which will be Phase 1 of the masterplan, followed by Phase 2, Phase 3. So they can sign something in Santiago that will be part of the plan, but not the whole plan and nothing but the plan. What's agreed so far is "a deal, pretty much, subject to getting it written," Trump told reporters.

That sounds a lot like winging it. Even the Iowa Soybean Association marketing guru is awaiting further details. This deal, in other words, isn't worth beans.

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TAGS: Investing | Markets | Politics | Stocks | Trading | World | U.S. Equity

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