Two Fronts, Two Games: China’s External Squeeze

Key arguments

• China faces two structurally different games: the US relationship is confrontational but episodic and deal-driven, while the EU challenge is becoming structural and institutionalised through market-access rules.
• The European Commission's proposed Public Procurement Act would replace three 2014 directives with a single directly applicable Regulation, introducing a horizontal European-preference framework and embedding economic security, resilience and 'undue third-country influence' considerations.
• China is not a party to the WTO Government Procurement Agreement and has no FTA procurement agreement with the EU, leaving Chinese suppliers more exposed; but the text is still a proposal subject to Parliament and Council negotiation.
• Beijing has strong incentives to stabilise the US front, since external stability buys time to rebalance the economy amid soft domestic demand and subdued credit demand.

Corresponding source evidence

1. President Xi Jinping will skip this week’s UN General Assembly in New York and instead travel to Washington for talks with President Trump on 24 September. · this week
2. The immediate objective is likely to be preserving the relative stability established under the current US-China trade truce, which is due to expire on 10 November.
3. Last week, the Hong Kong Monetary Authority raised the Base Rate by 25bps to 4.25%, in lockstep with Fed’s hike decision, according to the pre -set formula.