◼ ECONOMICS Bloomberg Businessweek October 14, 201936
Japan, a nation often bound by tradition, has been
wildly unconventional in its monetary policy. As the
first major economy in the postwar era to grapple
with deflation and a pronounced downshift in long-
run growth, policymakers have had little choice
but to get creative. The Bank of Japan was the first
to take interest rates to zero and, when that didn’t
work, pioneered quantitative easing in 2001. Now● Thecountrythatpioneeredzerointerestrates
is beingdesperatelyinventiveagainJapan’s Latest
Monetary
Experiment
and Zhejiang Dahua Technology Co., which by
some estimates control as much as a third of the
global market for video surveillance gear, and
SenseTime Group Ltd., the world’s most valuable
artificial intelligence startup. This marked the first
time the administration has cited human rights as a
reasonforactionagainstChina.Hikvisionandother
companieshavedeniedanywrongdoing.
TherewasalsonewsonOct.7 that, despite
White House denials, the administration continues
toexplorewaysinwhichtheU.S.canrestrictfinan-
cialflowsintoChina,includingpressuringcompa-
niesthatcompileemerging-markets indexes such
as MSCI and Bloomberg Barclays Indices to reduce
the weighting of Chinese companies. Also under
discussion is how to stop federal government pen-
sion funds from investing in China.
Meanwhile, a bill that would strip Hong Kong
of its special trade status with the U.S. has biparti-
san support on Capitol Hill and could pass through
Congress within weeks, presenting President Trump
with a dilemma over whether to sign it into law. One
reason the bill looks like an increasing certainty is
China’s angry response—and the NBA’s subsequent
bending to Beijing—following a Houston Rockets
executive’s tweet backing the protests in Hong
Kong. The incident has further fed anger about how
American companies often have to kowtow to do
business in China. Now Chinese sponsors of NBA
events are cutting ties with the league.
In meetings with U.S. visitors to Beijing in recent
weeks, senior Chinese officials have indicated the
range of topics they’re willing to discuss has nar-
rowed considerably, according to people familiar
with the discussions, who requested anonymity
because of the sensitive nature of the talks. China’s
top negotiator, Vice Premier Liu He, told visiting dig-
nitaries he would bring an offer to Washington that
doesn’t include commitments on reforming Chinese
industrial policy or the government subsidies that
Trump trade adviser Peter Navarro calls one of the
“seven deadly sins.” It’s emblematic of what analysts
see as China’s strengthening hand as the Trump
administration faces an impeachment crisis and a
slowing economy blamed by businesses on the dis-
ruption caused by the president’s trade wars.
Trump has said repeatedly that he’s opposed
to a “partial” or interim deal that would see the
Chinese step up purchases of U.S. farm exports
and his administration put further tariffs on hold.
However, some close to his trade team see the
recently concluded pact with Japan as a model of
whatsucha dealcouldlooklike.
TrumpcalledtheJapanpact“historic”atits
Oct.7 signing. Yet in reality its scope is modestTHEBOTTOMLINE AsthescopeoftheU.S.-Chinaconflict
widens to include technology, Hong Kong, and Beijing’s treatment
of ethnic minorities, a grand bargain seems more elusive.atbest.Americanfarmerswillfacereducedtariffs
ontheapproximately$7billion in shipments they
send to Japan each year. But that’s not largely dif-
ferent from what they’d been awarded in the Trans-
Pacific Partnership that Trump pulled out of in
January 2017. Notably absent from Trump’s Japan
deal is any mention of automobiles, which domi-
nate the bilateral trade. �Shawn Donnan