China's strategic calculus and summit dynamics (with Stephanie Flanders)

China is in a stronger position to challenge US sanctions due to rare earth leverage, but still wants stability. The summit is likely to proceed despite tensions, with limited trade breakthroughs expected. AI gives the US new leverage, and China's domestic political turbulence adds uncertainty.

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China's strategic calculus and summit dynamics (with Stephanie Flanders)

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Limited trade breakthroughs and ongoing uncertainty suggest no strong directional move for small caps in the near term.

Dan Ten Kate

China is in a stronger position to challenge US sanctions on Iran oil refiners, daring the US to sanction its banks, knowing Trump wants the summit and doesn't want things to blow up.

China has shown leverage by cutting off rare earths, and Rubio's statement that sanctions are not symbolic is seen as a bluff call by Beijing.
Dan Ten Kate

The US has new leverage from advanced AI tools like Mythos, which China is very concerned about, giving them incentive to keep things stable.

China has been very quiet on AI developments, suggesting deep concern, and the Trump administration now appreciates the need to maintain a lead.
Dan Ten Kate

On trade, the US has 301 investigations ongoing and wants to rebuild tariff walls; China's concern is that tariffs don't go beyond what was there before.

No major breakthroughs expected on advanced chips, Chinese EV investment, or Boeing deals due to national security restrictions.
Dan Ten Kate

China wants freedom of navigation and has benefited from open trade, creating some convergence with US interests despite opposing the Iran war.

The tone of the summit, language on Taiwan, and interpersonal dynamics will be key to watch, as China manages domestic political turbulence ahead of a Party Congress.
Dan Ten Kate

Xi Jinping has gotten rid of most of his top generals, indicating turbulence under the surface, and he would like a stable world to focus on domestic issues.

The Party Congress next year is like an election year in China, with jockeying for positions, adding to the incentive for stability.

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