EU makes deeper economic ties with China a priority

As per the latest news report from the Wall Street Journal, the new European Council President Charles Michel wants to provide a more unified approach to Beijing while also trying to avoid the US push towards not doing so.

Key quotes

Europe would continue to discuss its approach to China with Washington, it wouldn’t allow its ties, which were friendly but have turned warier in recent years, to be dictated by the US.

EU officials have struck a wary note about China in recent months, labeling the Asian giant a systemic rival in a strategic paper this spring. There is nervousness about China’s investment in major infrastructure in some parts of Europe and concern about Beijing playing on divisions in the bloc over ties with China.

The bloc has also faced strong pressure from the Trump administration to reject Chinese investment in Europe’s 5G telecommunications network, to take a more robust approach to Beijing’s military assertiveness in the South China Sea and to challenge China’s trade practices.

Yet as the Trump administration pursues an America First agenda while China and Russia show a willingness to deploy hard power, there is a growing push for the EU to enhance its geopolitical autonomy and common military capabilities.

FX implications

Even if the news suggests a likely political rift between the European Union and the US, its immediate market impact has been muted as no actual performances have been delivered. The US 10-year Treasury yields stay close to 1.92% whereas USD/JPY also holds on to the previous gains to 109.36.

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