The number of daily new cases for Covid-19 has fallen by more than half from the peak in the UK. The national lockdown has broken the back of wave 2, but NHS leaders warn of a “devastating third wave” in the New Year. Bed occupancy needs to drop to below 4,000 by the early weeks of 2021. Otherwise, wave 3 may push bed occupancy above the peak of wave 1 (17,000).
The UK is pressing ahead with its vaccination programme, starting early this morning. It will take time for this to reach full capacity and reduce infection rates. The UK Government faces tight deadlines if it wants to stymie wave 3.
China has been a big beneficiary of the rise in ‘pandemic’ demand (medical equipment). China’s Haier, for example, is expected to see a surge in orders for ultra-cold freezers.
November’s data, released this morning, showed an impressive rise of 21.1% y/y in China’s exports. The US has seen a particularly big increase, with Chinese exports up 46.1% y/y.
The risks of a secular expansion in the trade surplus between China and the US should not be under-estimated. The US continues to dominate in semi-conductor chips (specifically design) and software. The US is ‘home’ to the world’s premier EV manufacturer (Tesla). However, this is not enough: in the case of EVs, the China is far ahead in supply chains, one of the reasons why Tesla’s most productive factory is now in Shanghai.
It makes sense for the Chinese authorities to acquiesce and allow the Renminbi to appreciate by a further 10% or so over the coming months. Global cooperation will need the worlds’ two biggest emitters to work closely. Trade frictions are a threat and the Chinese government will need to accept the inevitable on exchange rates, to ensure a smooth working relationship.
Summary
• UK first, for once, but wave 3 still looms
• Chinese exports, a Biden dilemma
• A 10% rise in the Renminbi would help
