U.S. diplomats head to China despite row over Houston consulate – Reuters

Markets in Asia today are on standby for deteriorating relations between the US and China.

China warned on Thursday it would be forced to respond to the US move, which ha "severely harmed" relations and an article today in the Global Times has been a cause of alarm. More on that below.

Meanwhile, Reuters reports that a flight bound for Shanghai carrying US diplomat has left the United States as Washington presses ahead with its plan to restaff its mission in China a day after an American order to close the Chinese consulate in Houston sharply escalated tensions.

Lead paragraphs

A person familiar with the matter told Reuters the flight, carrying an unspecified number of U.S. diplomats, left Washington on Wednesday evening. The State Department did not immediately respond to a request for comment. An internal State Department email dated July 17, seen by Reuters, said the departm was working to arrange a charter flight to Shanghai from Washington’s Dulles International Airport departing on Thursday.

The source said this flight had departed earlier than initially planned.

The email said a tentative July 29 flight to Tianjin and Beijing was in the initial plan stages and a target date for another flight, to Guangzhou, was still to be determined The memo said priority was being given to reuniting separated families and returnin section/agency heads. 

The United States is working to fully restaff its mission in China, one of its largest in world, which was evacuated in February because of COVID-19.

Thursday’s flight went ahead despite a dramatic move by Washington to close China’ consulate in Houston amid sweeping espionage allegations. 

Background

  • Expelling US consular spies an option for China – GT analysts

Market implications

USD/CNH has already moved higher and the S&P futures wilted on speculations of Chinese retaliation.

If there are any subsequent closures of the US consulates, in say, Hong Kong, then we cold expect a market reaction.

 

 

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