00:00Let's get more on those trade tensions now and bring in Alicia Garcia Herrero, Natix's Chief Asia-Pacific Economist.
00:05And Alicia, we were just talking there with Garfield and at the top as well about how China this time around looks a little bit different to China during Trump's first administration.
00:15That extra confidence we see perhaps from Beijing, do you think it's warranted given the economic backdrop facing the country?
00:22It is warranted in as far as Trump is basically struggling with a strategy to contain China.
00:33But at the same time, that extra confidence could be quite detrimental down the road if China really thinks it can dare increase export controls to the level that has been announced.
00:48Not so much because the U.S. retaliate with 100 percent tariffs, maybe not, but because it would create havoc to the global economy.
00:59Also to China in a way, because there's no way China can avoid these huge disruptions in supply chains having an impact on its own economy.
01:09So in a way, China could be a little bit of a dying of success if you ask me in terms of how it is approaching the U.S.
01:18The fact that China has been also able to reroute a lot of its trade that would have maybe once gone to the U.S. over the past few months, does that also lead it or lead it to be more confident as well?
01:34Yes.
01:34Well, this is something that China started doing under Trump 1.0.
01:38I think China knows that there is a limit to that because we're still pending these tariffs.
01:48Basically, Vietnam does have 40 percent tariffs already on trans shipping, but others could because that was Trump's basically original idea with the reciprocal tariffs.
01:59They have not been fully implemented except for Vietnam, but they could come.
02:04So in that regard, again, China's excessive confidence could be a problem if they continue to reroute their exports through other markets.
02:13What's your outlook for the yuan?
02:16To what degree has a weak yuan been helping China?
02:19And do you think we're going to see that trend continue?
02:21Is there going to be more devaluation for the RMB?
02:23Well, I think the RMB needs to trade very carefully because it's already very weak against other currencies, especially euro, you know, all of the European currencies, UK, etc., British pound.
02:40All of those currencies have actually taken the brunt of a weaker dollar, but the RMB hasn't.
02:45I think the RMB will probably continue to trade close to the dollar trend and still depreciating against a lot of other currencies in the world, which happen to be China's largest competitors.
02:58This is Europe.
02:59So that's already good enough for China.
03:01They don't need to go beyond because that could create all of a sudden capital outflow.
03:06And that's not something China wants to see at the current juncture.
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