Focus this week:
In the second half of 2021, the Biden administration continued to build momentum on the “Indo Pacific economic framework”. With the mid-term elections approaching, the Biden administration has significantly accelerated the pace of promoting the Indo Pacific economic framework since April. From May 20 to 24, US President Biden will successively visit South Korea and Japan and launch the “Indo Pacific economic framework” (IPEF).
IPEF is a new strategy for the United States to interfere in economic and trade activities in the Asia Pacific region and curb China’s development after the absence of the traditional trade agreement cptpp. At present, the hollowing out of American manufacturing industry is serious, and American politicians realize that it is difficult to open the Chinese market with traditional trade agreements. Therefore, after abandoning the cptpp, the Democratic Party intends to accelerate the control of core technologies in the Asia Pacific region and increase the blockade on China in core areas within the Indian Pacific economic framework. The four supply chains delineated by the White House, semiconductor manufacturing and advanced packaging, high-capacity batteries, key minerals and materials, as well as medical supplies and APIs, are expected to be the core areas for the US side to construct IPEF.
Can the new round of technological hegemony led by the United States achieve the desired results of the United States? Recently, the United States has begun to cooperate with Europe to achieve closer cooperation in key supply chains such as clean technology, rare earth, semiconductor and information and communication technology. Japan and South Korea have also made it clear that they want to join IPEF. However, if the United States fails to give substantive concessions and benefits to other countries, the sustainability and influence of the framework will be greatly reduced.
With the entry into force of RCEP, the two-way exchanges between China and countries in the Asia Pacific region have become more and more active. ASEAN has become China’s largest trading partner in the first quarter of 2022, and China has maintained a long-term trade deficit with Japan and South Korea. The door of China’s opening to the outside world will only open wider and brighter. We believe that by trading time for space, history will stand on China’s side.
Overseas market:
This week, the maturity yield of us 10-year Treasury bonds fell, and inflation expectations fell. On May 20, the yield of us 10-year Treasury bond closed at 2.78%, down 15bp from last week; The implied inflation expectation of 10-year Treasury bonds fell by 14bp compared with last week. Commodity prices rose more or fell less, while industrial products and precious metals generally rose. Global stock markets rose and fell, while European and American stock markets generally fell.
Overseas news:
US Treasury Secretary Yellen advocated Abolishing Some tariffs on China. Finland and Sweden applied to join NATO. The US Senate passed the US $40 billion aid bill to Ukraine, and the house of Representatives urgently passed the additional aid bill last week. Biden opened his first trip to Asia and paid a three-day official visit to South Korea from the afternoon of the 20th.
China Watch:
Since May, upstream: crude oil prices have risen month on month, average coking coal prices have risen month on month, copper prices have fallen month on month, and aluminum prices have fallen month on month. Midstream: the operating rate of blast furnace increased, the cement price index fell month on month, the price of rebar fell month on month, and the inventory increased year on year. Downstream: commercial housing transactions remained low, pig prices rose month on month, and vegetable and fruit prices fell month on month. Liquidity: the money market interest rate is down, and the bond market interest rate is down.
China News:
The interest rate of LPR over 5 years was reduced by 15bp. Yang Jiechi communicated with Sullivan, assistant to the president of the United States for national security affairs, at request. The Ministry of Finance issued a circular on typical cases of implicit debt accountability of local governments. Zou LAN, director of the financial market department of the central bank, took over as director of the monetary policy department. The CPPCC National Committee held a special consultation meeting on “promoting the sustainable and healthy development of digital economy”.
Risk tip: the global epidemic has been repeated and the international situation has further escalated.
