Chinese stocks suffered another broad retreat during Friday’s trading session ahead of major trade talks scheduled between the United States and China next week.
There was faint hope earlier this month that both sides may be close to a breakthrough, but now analysts have become more skeptical that a deal can be reached. Reports have recently surfaced that American envoys are pressuring allies to avoid business with China-based Huawei Technologies.
The iShares MSCI China ETF (NASDAQ:MCHI) has dropped 16.8% over a three-month span as of close on November 22. The ETF is down 20.5% year over year.
The Asia Pacific Economic Community (APEC) summit was seen by some as an opportunity for U.S.-China relations to warm. Instead, U.S. Vice President Mike Pence launched a broadside against China’s policies, evoking the protectionist rhetoric of some of the hardliners in the Trump administration.
In the past China has indicated that it is willing to increase its imports of U.S. goods in order to reduce the U.S. trade deficit. However, this is seen as insufficient by Washington’s negotiators.
The key disagreement continues to centre around China’s technological progress, and its “Made in China 2025” economic program which aims for the advancement of these hi-tech industries.
The two economic powerhouses are locked in a geopolitical struggle that is likely to worsen into the next decade. Chinese assets will experience volatility going forward, and investors should look elsewhere for exposure to emerging markets.
