The US and China are decoupling, but not as fast as you think

BEFORE China’s fighter jets roared and its ballistic missiles screamed into the seas off Taiwan last week, analysts had already begun laying out — from incursion to inaction — what investors could expect next.

Consensus among those forecasters was in short supply, and if anything, there is even less of it now. Both the US and China have spent recent days arguing about the definition and condition of the status quo, but the status quo now feels unambiguously in motion. The safest looking analytical bet, in that context, is on sharply accelerated economic decoupling between the US and China, but how likely is it to move from the current, highly-selective form to a broader split?

Beyond the Chinese military exercises that continued afresh on Monday (Aug 8), a day after their scheduled end, and the petulantly imposed sanctions on Nancy Pelosi herself, the possible consequences of the US House Speaker’s visit to Taiwan sit on a wide speculative spectrum. China’s abrupt suspension on Friday, of bilateral meetings and cooperative talks on everything from defence policy coordination to drug smuggling, lengthens the list of bad plausible scenarios.