Week in review
- U.S. October CPI rose 0.2% m/m, pushing annual increase to 2.6%
- China October activity data saw retails sales up 4.8% y/y, better than consensus. Industrial production disappointed at 5.3% growth y/y. Fixed asset investment remained steady.
Week ahead
- Japan trade balance
- UK CPI
- Japan core CPI
Thought of the week
President-elect Trump's proposed tariffs against China have raised concerns about their potential impact on Chinese growth, equities, currency, and more. However, several factors now work in China's favor compared to the 2018 Trade War. China's reliance on the U.S. as an export market has decreased, and the "surprise" factor is not as strong as it was initially. Additionally, Beijing has more potential countermeasures at its disposal, such as expanded export control laws, anti-foreign sanctions laws, and an unreliable entity list. Since 2018, Chinese exporters have diversified their export destinations, established transshipment routes before entering the U.S., and increased foreign direct investments in other countries to set up manufacturing facilities. Notably, 86.5% of MSCI China's revenue is generated domestically, with only 2.7% exposed to the U.S., suggesting that the direct earnings impact from U.S. tariffs is likely smaller than that from domestic policy tailwinds. While the magnitude and scope of the current tariff threats are much larger than in 2018, there remains significant uncertainty about the extent to which they will be implemented. Nonetheless, there are reasons to believe that China is now better positioned and better equipped to handle rising U.S.-China trade tensions.
China’s diminishing reliance on U.S. as an export market
Share of Chinese goods in total U.S. goods imports
Source: FactSet, J.P. Morgan Asset Management. Data reflect most recently available as of 15/11/24.
Market data
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