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Decoding the Xi-Kim meeting in Beijing; on Guo Shuqing as central bank Party secretary

SinoInsight 1
Fosun chairman Guo Guangchang tendered his resignation from Fosun Pharma’s board and strategy committee on March 26. Two days later, former Anbang founder Wu Xiaohui was charged in a Shanghai court for defrauding investors of over $10 billion.

OUR TAKE
Xi Jinping’s warning to financial “crocodiles” is having an effect.

Guo Guangchang appears to have read the signs early. From the second half of 2017, he started resigning from the board of several Fosun subsidiaries and Fosun kept selling assets. To date, Fosun has sold between $47.7 billion to $63.6 billion worth of assets.

Guo was investigated after the 2015 stock market crash, but he wasn’t prosecuted because he collaborated with the authorities in their probe of other officials. In contrast, Wu Xiaohui saw that Anbang continued expanding its debt on a large-scale and increasing risks despite warnings from the authorities. Finally, not even being Deng Xiaoping’s son-in-law could prevent Wu’s downfall.

SinoInsight 2
On March 28, U.S. Trade Representative Robert Lighthizer said that tariffs on Chinese imports might not be imposed until after 60 days. Earlier, the USTR had identified a 30-day period for written public comments on the tariff list.

On March 29, China’s defense ministry announced that it is coordinating with the U.S. on a possible visit by U.S. Defense Secretary Jim Mattis to China.

OUR TAKE
We believe that the two developments above are linked with Kim Jong Un’s pledge to denuclearize the Korean Peninsula. China tariffs could be stalled until after the Trump-Kim meeting in May. And Mattis’s China trip could involve specific discussions about how Pyongyang will go about dismantling its nuclear program.

The developments further affirm our analysis that the Xi-Kim meeting forebodes peace on the Korean Peninsula. Indeed, if Kim abandons his nuclear weapons and acedes to U.S. demands to permanently cease work and dismantle its nuclear facilities (Punggye-ri Nuclear Test Site recently saw greatly reduced activity), then hostilities on the Korean Peninsula could end with the signing of a peace treaty.

For its role in bringing Kim to the table, China could gain some concessions from America on the tariffs issue.

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