US-China trade tension: Is it a concern for Asian equity markets?

What could newly proposed tariffs between the US and China mean for Asian markets?

Time to read: 3 min

On March 22, President Donald Trump signed a memorandum that would impose 25% tariffs on up to $60 billion in annual imports from China, relating to intellectual property practices under Section 301 of the 1974 Trade Act. The proposed tariffs target 1,300 product categories concentrated in aerospace, information and communication technology as well as machinery, and a detailed list will be unveiled within 15 days for public comments. Earlier this year, the US announced import tariffs on steel and aluminum due to national security concerns under Section 232, as well as tariffs on washing machines and solar panels.

In reaction to the newly proposed tariffs, the Ministry of Commerce in China responded by announcing similar tariffs on around $3 billion of US imports ranging from fresh fruits to steel pipes.

China’s trade surplus with the US widened

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MSCI to add China A-Shares to emerging markets index: What does it mean for investors?

The decision brings better representation of the entire Chinese economy

After four years of discussions, on June 20, 2017, MSCI announced a ”yes” decision on including China A-shares in the MSCI Emerging Markets Index, which tracks $1.6 trillion1 worth of assets around the world, and related indexes.2 The decision is seminal because it provides previously unavailable A-share exposure in emerging markets (EMs) and global indexes. The initial weight of China A-shares in the MSCI Emerging Markets Index upon the August 2018 inclusion will be 0.73% (2.49 % in the MSCI China Index), comprising 222 onshore-listed stocks. The number of stocks is higher than the originally proposed 169 stocks in March’s consultation paper.

This change is

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China: Making solid progress on its Five-Year Plan

As the National People’s Congress convenes, we highlight three government priorities to watch

Mike_ShiaoThe annual National People’s Congress (NPC) started on March 5, 2017, with Premier Li Keqiang announcing key economic growth targets and major reform initiatives designed to help China achieve stable growth and become a “moderately prosperous” society by 2020. These announcements are in line with the vision that was laid down two years ago in China’s 13th Five-Year Plan.

China was largely on track with its policy targets in 2016. The economy grew 6.7% (as seen in the table below) while making progress in reducing industrial overcapacity and financial risks. 2017’s key economic targets are designed to build on that progress, with further fine-tuning in growth rates widely expected, to allow room for the Chinese government to proceed with reform issues such as overcapacity and leverage.

The table below compares the key targets announced this year and last year:

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