US president Donald Trump said that he will impose a fresh 10% tariff on the remaining $300bn of Chinese imports last Thursday — a day after US trade representative Robert Lighthizer and treasury secretary Steven Mnuchin returned from Shanghai after the latest round of trade negotiations.
China officially responded to the news on Friday late afternoon, vowing to retaliate.
“The action from the US severely steered away from the agreement reached between the two leaders in Osaka and does no good in solving the problem,” a spokesperson at the Ministry of Commerce said. “China is extremely dissatisfied and firmly opposes the action. If the US implements additional tariffs, China will have to take retaliatory measures to protect its core interest. All consequences will be borne by the US.”
As the prospects of a trade deal between the two countries faded, one of the biggest impacts was on the offshore renminbi (CNH).
The USD/CNH weakened beyond the psychological level of 7.0 on Monday morning, the first time since May 2008.
Immediately after the level was reached, the People’s Bank of China released a statement: “The number seven is not an age in which case a person cannot return below that level after he or she has crossed that line. It is also not a dam in which case water will come rushing in once it is broken.”
Yu Song, the chief China economist at Beijing Gao Hua Securities, said in a Monday morning note: “We think the proposed additional tariff was likely viewed as a surprise to China, judging from the post Shanghai Summit statement on July 31, which said that the US and China delegations had a candid, efficient and constructive discussion on trade issues.” He added that renminbi depreciation is likely to continue.
*
Hong Kong-listed companies with weighted voting rights (WVR) will be included in the southbound trading of Stock Connect for the first time, according to a Friday agreement between the Stock Exchange of Hong Kong, the Shanghai Stock Exchange and the Shenzhen Stock Exchange.
The two mainland bourses published the draft rules on the same day. The rules will be open for public consultation until August 9.
*
The Chinese regulators have announced new measures to evaluate the “reputation risk management capability” of securities houses, according to local media reports.
Sources in the Mainland confirmed the news to GlobalRMB.
Regulators will score each securities house based on two criteria — their ability to deal with negative public opinions and their ability to interpret regulatory policies and guide public opinion.
*
Morgan Stanley is set to become the controlling shareholder in Morgan Stanley Huaxin Securities, a joint venture domestic broker.
Shanghai China Fortune Securities, the broker’s Chinese parent, filed a statement with the SSE on August 2.
China Fortune signed a contract to transfer 2% of its shares in Morgan Stanley Huaxin Securities to Morgan Stanley for around Rmb376m ($54m). The latter will have a 51% ownership in the JV after the transfer.
*
Things are heating up in Hong Kong-China relations.
On Sunday evening, police fired tear gas to disperse protesters blocking roads in Causeway Bay, a busy shopping district in Hong Kong. During a Saturday protest, some protesters tore the Chinese national flag and threw it into the sea.
Multiple metro lines and buses were shut down on Monday morning due to a general strike, the first in the city in decades. In addition, more than 200 flights to and from Hong Kong were also cancelled as the strike got underway.
Beijing will not sit by and let the disruption in Hong Kong go on, according to a Xinhua commentary on Sunday.