The U.S. stock market is anticipated to open with a worsened sentiment as Chinese State Councilor and Foreign Minister Wang Yi said that U.S. and China have come to a “crossroads” again, weakening the foothold of stocks.
“While China opens wider to the U.S. and the rest of the world, we expect the U.S. to do the same to China and remove all unreasonable restrictions. In a word, China’s efforts and achievements of reform and opening up in the past several decades have been widely recognized. They should not be deliberately ignored or denied.”
While Minister Wang emphasized that the trade dispute is not beneficial for either China or the U.S., the request of China to remove “unreasonable” restrictions, could be considered a new roadblock in the trade deal ahead of the upcoming round of trade talks.
Stocks already on the decline, more pressure builds on the stock market
After the Democratic Party submitted an official impeachment inquiry, the U.S. stock market dwindled as the Dow Jones plummeted by more than 100 points in a single session.
Any negative comments in regards to the trade deal at this juncture of the trade talks from any of the two sides are likely to have a negative impact on global stocks and the respective stock markets of the U.S. and China.
It remains to be seen whether it was a strategic move from China to express to the U.S. that China is not anxious for a deal in spite of the goodwill gestures shown by both sides in recent months.
The timing of the statement of Minister Wang which coincides with impeachment talks is set to build increasing pressure on U.S. stocks and the global stock market in general, raising geopolitical risks in the international economy.
Minister Wang said:
“China has no intention to play the game of thrones on the world stage. For now and for the foreseeable future, the United States is and will still be the strongest country in the world.
The trade frictions between China and the U.S. in the last year have inflicted losses on both countries, losses that should not have happened.”
There are speculations that the restrictions mentioned by Minister Wang include the ban on major Chinese companies like Huawei imposed by the Trump administration.
Due to the executive order signed by President Trump which explicitly prohibited Google and other U.S. technology companies in dealing with Huawei, the newest line of Huawei’s flagship products could not feature widely utilized apps like Google Chrome, YouTube, and more.
Huawei could be the variable
Depending on the next round of trade deal talks, increasing tension will likely weaken the momentum of U.S. stocks after it took a beating from the impeachment inquiry in the past 24 hours.
If the U.S. decides to remove the restrictions Minister Wang mentioned such as its ban on Huawei, strategists anticipate that the trade talks to lead to a partial deal as suggested by both the U.S. and China.
Hu Xijin, the Global Times chief editor of English and Chinese editions, recently stated that Huawei has been able to ship out products and sustain its operations normally. But, concerns regarding its latest smartphone line are still being expressed.
“Huawei Chairman Liang Hua told China-Germany-USA Media Forum that the US putting Huawei on entity list has had no substantial impact on Huawei’s business. All of the company’s flagship products are shipped normally. Ecosystem of Huawei’s end products will be built in 2-3 years,” said Xijin.