Weekly Wrap by Pythagoras Investing : 14 Reasons Why

China has openly stated the reasons for the trade war with Australia.  In public statements and leaked correspondence, it pulls no punches naming the 14 reasons why Australia is to blame for the trade impacts we have been experiencing.

This is not new.  A senior Chinese diplomat spelt it out at the Canberra Press Club which we wrote about at the end of August here.  The main gripe at that stage was that the Australian government never consulted the Chinese government in whatever way before the [inquiry] proposal came out.  This was an affront to the strategic partnership – lacking courtesy and diplomacy.  China believed Australia’s push for an inquiry was at the behest of the United States.  (At that time Trump was attempting to blame coronavirus on China.) Kicking sand in the faces of our biggest trading partner seems to have had quite an impact!

RCEP Signed with a lot of fanfare

The Regional Comprehensive Economic Partnership (RCEP) Agreement has been signed.  The aim of RCEP is the removal of trade barriers between ASEAN and China, Japan and South Korea. It is the first multilateral free-trade agreement China is a part of.  It will take 2-3 years to take effect but it shows a commitment to integration not de-globalisation.  The region is important with around 30 per cent of global GDP, population, and global trade.  RCEP will add $250 billion to the global economy by 2030. The main beneficiaries are said to be are China ($115 billion), Japan ($65 billion) and South Korea ($32 billion) over 10-20 years.

For Australia, the benefits are estimated at $US1 billion. This is because we have existing Free Trade Agreements with  all the remaining members. We could have benefited if India did not exit.  There isn’t a benefit to the Australia-China trade war as RCEP doesn’t cover anti dumping and subsidy agreements.  It may encourage talk which is an avenue which has been closed – Australia now has 14 ideas of what went wrong instead of the rhetoric of the Australian Government of being “surprised by China’s actions”.

Australia-Japan Defence pact

At the same time Australia and Japan have taken a major step towards signing a defence pact which will enable both countries to intensify military cooperation in the face of “rising tensions with China”.  It represents a greater alignment with the US!

Mr Morrison hailed the agreement as a “pivotal moment in the history of Japan-Australia ties”.  He again pokes at China’s presence in the South China Sea and the East China Sea and its coercive attempts to change the status quo.

Did you know that China and Russia are mooted to have their own military alliance. Who wins out of these?  My guess is China/Russia!


Markets have been strong. Whilst we don’t believe that every day will be up, the trend towards our predicted target for the ASX200 of 6800 by February 2021.  At 6500+ that extra 4-5% doesn’t wound like much but it is about 10x the current interest rate on offer!

For those who watch Ausbiz News we were interviewed this week of these issues here.

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