Looking at what I think is US policy, I only see two areas of near term conflict -
The #5 issue , which is the connected North Korea / Japan militarization / China's offensive capabilities vs. Japan issue
Most likely this gets resolved by Kim Ill Jong going away.
There could be a limited US strike on North Korea's delivery capabilities - aircraft, missles, and submarines, and multiple stikes on the nuclear facilities. This is a finite target list.
Biggest problem is the vulnerbility of South Korea.
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The ongoing issue is likely to be trade and business related.
Is China engaging in 'normal' trade relations with the US, or using trade as warfare to hollow out US capabilites ?
That is, hollowing out US capabilities more than US elites have.
The other part would be related to intellectual property - it is one thing for China to rip off IP for sale within China, violating the WTO treaty, it is another issue if the pirated items are exported. Right now, much of these pirated goods are going to third world countires, or being sold on the street.
This is a concern to Europe and Japan also.
If China is precieved as contucting trade warfare instead of being just an aggresive low cost competitor, trade restrictions will go into place which will take years to remove, reversing much of the WTO and GATT accomplishments.
The extensive FDI that China has encouraged will tend to forestall or limit trade restrictions.
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Since I don't think these are huge problems, I expect relations will recover. realtions should get worse until about two weeks after the UnoCal issue is resolved.
Right now, I expect that some stocks should start to be affected, like WAL-Mart, some of the China funds (CHN:NYSE).
So we may be months away from the bottom. |
