China is having a good time right now
Contrary to fears over US protectionism impacting the economy of China (FXI) (YINN) (ASHR) (MCHI) adversely, Mattias Martinsson, Chief Investment Officer of Tundra Fonder, believes that China is exceptionally pleased with the increasingly nationalist political platforms in western markets.
Yes, the US President Donald Trump did refer to China as the ‘grand champions’ of currency manipulation back in February. Yes, the US withdrew itself from the TPP (Trans-Pacific Partnership) in an attempt to bring jobs back to the US (SPY) (IWM). However, Martinsson’s view is that the noise around US protectionism has not affected China to any significant extent yet.
RCEP versus TPP
As also pointed by Martinsson, China is actually enjoying the buzz over US protectionism. During a conversation with Frontera, Martinsson mentioned the Regional Comprehensive Economic Partnership (or RCEP) in this regard. Now, China happens to be the forerunner for the establishment of the 16-country RCEP. The RCEP is to include the 10 ASEAN (Association of South-East Asian Nations) governments and their six FTA partners: Australia (EWA), China (FXI), India (EPI), Japan (EWJ), New Zealand (ENZL) and South Korea (EWY).
What’s important to note here, as Martinsson pointed out, is that while the TPP countries together constituted 37% of world GDP, 26% of global trade and 11% of global population, the RCEP economies would together constitute 30% of world GDP, 27% of global trade and 48% of global population. Once the RCEP goes through, China would strive to strengthen its trade ties with low-cost havens such as Philippines and Malaysia.
For more on the RCEP, read US Exits TPP: Will Asian Economies Now Rally Behind RCEP?
The 6 billion would compensate
“We have one billion people living in the developed world, and six billion in developing countries. In the end, the developing countries (EEM) (VWO) will manage to more than compensate,” even if emerging markets are negatively impacted by the protectionism drive in the developed world (EFA) (VEA), according to Martinsson.