Chinese bond yields are up 10% this month.
Since the election they are up from 3.25% to 5.5%, which is up 57% in 180 days. Generally, that would be a cause for concern but nothing seems to concern this market, including the fact that tens of Billions of Dollars worth of bonds have lost 57% of their value in 6 months. $560Bn has now been chopped off the Shanghai Stock Exchange in 2017 and the small-cap (non-Government) ChinNext Index is back at its 2015 crash lows.
The G7 Finance Ministers are meeting this weekend and Chinese President Xi Jinping is having his own summit including other World leaders like Putin (no need for Trump if his boss is there), where he is promoting his $500 billion trade-and-infrastructure plan, which is called the Belt and Road Initiative. The summit begins Sunday and will showcase Xi’s plans to remake global trade patterns in China’s favor while the US moves in the opposite direction and closes its borders and taxes trade. China needs to do something to pull their economy out of a power-dive that's been accelerating since early April:
Meanwhile, Mexico, who is also meeting with China, has put the US Governent on notice that they have other places to export to if NAFTA gets torn up. "We will use (the China visit) geopolitically as strategic leverage" declared Mexican Economy Minister Ildefonso Guajardo. "It sends the signal that we have many alternatives."
"If NAFTA disappears, I can export cars (to the United States) paying 2.5 percent tariffs. If they want to export yellow corn to me, I can raise tariffs to inaccessible levels," Guajardo said. "But to make that strategy credible, I have to broaden our agreements with Brazil and Argentina."
This is the way a President can destroy the economy, not just for a moment, but for decades to come. The GOP is fond of pretending that, 25 years later, NAFTA is the reason jobs moved overseas but, if it turns out that, like pretty much everything, that they are lying about that and that all they will accomplish…