Expect further investment from China to Taiwan. Fully energized cross-strait business deals between Taiwanese and Chinese companies will be emerging on the horizon.
China and Taiwan signed Thursday (August 9th) their first investor-protection agreement – paving a way to strengthen Taiwan’s relationship with China.
The agreement is designed to address Taiwan’s concerns about resolving business disputes in China, and questions about their rights if detained there.
Is this a big deal? The answer is a resounding yes.
This signals an important progress in long-running trade talks between the two governments. We all know that while China is Taiwan’s biggest trade partner, China is also Taiwan’s political adversary. An agreement like this, however, can put the relationship on a more forward-looking trajectory.
This could also lead to more M&A. Chinese companies are already looking to buy intellectual property and gain manufacturing knowhow from Taiwan companies.
Once teamed up with Taiwanese, imagine how powerful Chinese vendors in the electronics industry could become.
Chinese export and import growth slowed markedly last month, flashing warning signals in both the domestic and the global economy.
Will Beijing let renminbi fall?
Yet another data point emerged to confirm China’s sluggish economy: China’s trade figures.
China’s exports rose 1 per cent year on year in July, a six-month low and down from an 11.3 per cent pace in June. Imports were up 4.7 per cent, dipping from June’s 6.3 per cent pace. China was left with a $25.1bn surplus, a two-month low.
These developments intensify calls in China for Beijing to take measures to stimulate growth, and to let the Renminbi depreciate further to help prop up China’s export
Earlier this week, the China Securities Journal, an influential state newspaper, wrote that China needed a weaker currency to compensate for deterioration in the global economy.
The Financial Times sees this “one of the strongest signals yet that China is willing to do what forex markets have been signaling for months: let the Yuan fall against the US dollar.”
Renminbi appreciates against U.S. dollars over the last two years
Fluctuating renminbi against U.S. dollars over the last 12 months
Of course, it’s almost certain that if Beijing let the renminbi fall more steeply against the dollar, a political dispute between the U.S. and China wouldn’t come far behind.