The Day at a Glance | Aug 2 2022

The Top

*Pelosi will travel to Taiwan despite threats of action on behalf of China´s army.

*IMEF indicators point towards an acceleration in Mexico´s economy during July, a promising start to the 3Q22.

*The Popular Bank of China committed itself to maintain the country´s real-estate sector stable.

*Markets anticipate interest rates in Europe will increase another 100bp in light of risks of a recession.

Economic environment

Pelosi visits Taiwan. Speaker of the United States House of Representatives Nancy Pelosi, will arrive in Taiwan at 9:00 am Mexico City time in a diplomatic visit that has been condemned by China. Pelosi has openly criticized the violation of human rights in China, and her high position in US politics means that her visit will not be tolerated, as this is the first time in 25 years that a high ranking US politician visits the country that challenged China and separated itself from its communist project. China still considers Taiwan as part of its territory and sees Pelosi´s visit at some sort of acknowledgement of Taiwan´s independence and an interference in internal affairs. It´s been reported that Xi Jinping warned Joe Biden in a conversation last week that there would be consequences in case Pelosi visited Taiwan and met with President Tsai Ign-wen. In the last few days, China´s military´s Defense spokesperson, Zhao Lijian, said that its country´s army will not “sit idly by”. The visit threatens to deteriorate China-US relations even further, even with a risk of a direct armed conflict between both in the Taiwan Strait. Recent reports indicate that China has carried out military exercises with fighter jets in the Taiwan Strait this morning. Additionally, it´s believed that – as retaliation for Pelosi´s visit – China could fly some aircraft above Taiwan and violate airspace agreements and pressure Taiwan´s government for action; it´s also believed that fighter planes could force the plane that Pelosi is in to exit the area. Other possible retaliations on behalf of China could include ballistic testing on Taiwan´s border, diplomatic protests or direct occupation of islands on the border.