China's President Xi just moved to ease concerns about global trade -- and financial markets love it

Picture: Getty Images

Chinese President Xi Jinping’s speech at the Boao Forum appears to have gone down well with investors across Asia.

Based on wire headlines from Reuters, Xi made all the right noises when it came to the outlook for Chinese trade policy, helping to calm investor nerves that have been rattled over the past month as trade tensions between the United States and China increased.

Of note, Xi told the forum that globalisation is an irreversible trend, adding that China will do its part by taking major measures to open up its economy as soon as possible and widen market access to foreign-funded firms.

Importantly, Xi said China will protect intellectual property rights of foreign firms, helping to address one of the key concerns the Trump administration pointed to at the start of the latest trade spat.

Xi added that he hoped developed nations will remove barriers on high-tech exports to China; again, another key factor in the recent escalation in trade tensions with the US.

As seen in the chart below from Westpac Bank, China’s trade surplus with the United States has ballooned over the past decade as exports to the US grew substantially faster than imports heading in the other direction.

Source: Westpac Bank

In an attempt to reduce the trade imbalance between the two nations, the United States has proposed tariffs on $US150 billion in Chinese imports entering the country, accounting for around 6.6% of China’s total exports last year.

Financial markets have reacted positively to Xi conciliatory speech, bidding up riskier assets such as stocks and commodity currencies like the Australian dollar.

As a proxy for trade war concerns, there are few better financial indicators out there than movements in the Australian dollar-Japanese yen cross.

It’s currently up 0.84% for the session, and at the highest level in nearly a month, indicating that Xi’s speech has helped to calm previous concerns.

AUD/JPY Hourly Chart

US S&P 500 stock futures are also rallying, currently up 0.8% as at 1.50pm in Sydney.

Australia ASX 200 5847.70 , 0.67%
NZ NZX 50 8466.21 , 0.14%
Japan TOPIX 1734.77 , 0.52%
Shanghai Comp 3154.26 , 0.51%
Shenzhen Comp 1826.08 , -0.31%
HK Hang Seng 30485.53 , 0.85%
Sth Korea KOSPI 2445.90 , 0.07%
Sinagpore STI 3459.75 , 0.28%
Taiwan TAIEX 10956.74 , 0.58%
Philippines PSI 7932.39 , -0.17%
Indonesia JKSE 7932.39 , 0.43%
Thailand SET 1750.68 , -0.03%
S&P 500 Futures 2640.25 , 0.81%

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