Source: Citic Securities Research Author: Jiang Ya, Yang Qingpu, Xu Yingbo, Liao Yuan, Dan Zhuling Dubbed 618 grand promotion in 2024 has come to an end, and Citic Securities expects that the e-commerce large cap GMV during this period is expected to achieve low double-digit growth (+12% or so), continuing the positive trend since the beginning of the year and May. Structurally, it is judged that the growth center of content e-commerce platforms has moved downward, and the growth rate of shelf e-commerce platforms has rebounded under active investment. Platform-wise, Citic Securities judges that the core platform GMV growth rate during 618 is ranked as follows: TikTok > PDD Holdings > Tmall > JD.com.
Authors: Yang Fan, Yao Yuan, Cui Rong, Maxigova

• In terms of debate situation, Biden's on-site performance was lower than expected. Although the success or failure of a single debate is not enough to completely determine the final result, expectations about Trump's return may continue to ferment.

(1) On the evening of June 27th local time in the United States, President Biden and former President Trump held the first televised presidential election debate. Compared with the previous tradition, the first presidential candidate debate this year was held several months in advance, and the rules were also different.

(2) From the perspective of the two people's debate strategies, Biden tried to focus on his record in office, demonstrating a stable and mature policy style, highlighting Trump's extremist tendencies, and tried to respond to the questioning of his health status from the outside world, replicating the successful effect of this year's State of the Union address. Trump tried to attack Biden's inflation and other issues, questioning Biden's leadership abilities, and especially trying to ease some voters' concerns about his extremist tendencies.

(3) From the on-site performance, Biden's debate strategy was not smoothly implemented, but further deepened the outside world's concerns about his health status. Although Trump has some deviation on many argument points, he showed overall better debate results. According to the reports from CNBC and other media after the debate, the gap between Biden's real-time polls and Trump has further widened.

(4) In terms of expected impact, although according to historical experience, the success or failure of a single debate is not enough to completely determine the final result, expectations about Trump's return may continue to ferment. Although Biden still said that he is committed to defeating Trump afterwards, discussions about "Democratic Party changing the candidate" have started within the Democratic Party and the media. Theoretically, the congresses of the two parties have not yet been held, and the two have not officially obtained their party's nomination in the procedure. But changing candidates at this time still faces risks such as lack of preparation, and we need to pay attention to the development of follow-up events.

• In terms of policy advocacy, in a state of political polarization and with both candidates having a record of governance, they launched a fierce attack and defense on economic, social, and diplomatic issues, but the overall incremental information was limited.

(1) Objectively speaking, short-term television debates are more about on-site effects than focusing on policy details, especially in a state where both have a record of governance and a highly politically polarized situation where candidates are difficult to give super-policy proposals in the debate site.

(2) In terms of economic and industrial policies, the focus of the debate is on finance and the "re-industrialization" of the United States. In terms of fiscal policy, Biden emphasized raising social security levels and increasing taxes on high-income groups, tending to stimulate demand, while Trump emphasized the positive effects of tax reduction policies and tended to improve supply. In terms of industrial policies, both candidates emphasized the strategy of "re-industrialization" in the United States, attaching importance to manufacturing and infrastructure; but there are some differences in focused areas, such as the Democratic Party focusing on public transportation infrastructure, while the Republican Party pays more attention on the power grid, energy transmission, and network security and other fields. And the two sides have fundamental differences in viewpoints on climate and energy policies.

Overall, the incremental information in terms of economic and industrial policies in this election debate was limited, and the two candidates continued their basic policy tone in the past, emphasizing their own records while in office.

(3) On social issues, which were also the focus of this debate, including abortion rights, gun control, immigration, and the rights of minority groups, Biden's social policy proposals include support for abortion rights, support for gun control, promoting racial equality, opposition to the death penalty, and open immigration policies. Trump is relatively anti-immigrant, but he has a reserved attitude towards the abortion rights issue. Especially, concerning the issue of abortion rights, the debate between the two parties was particularly fierce. Biden claimed that overturning the Roe v. Wade case was "a terrible thing," while Trump praised the Supreme Court justice who supported overturning the Roe v. Wade case and said that legislation on abortion should be decided by state governments. Whether the Democratic Party can replicate the beyond-expectation results in the 2022 midterm elections through the issue of abortion rights deserves attention.

(4) On the issue of foreign affairs, the two sides launched a fierce attack and defense on issues such as the Russo-Ukrainian conflict, military assistance to Ukraine, NATO solidarity, the Israeli-Palestinian conflict, policies toward Israel, the withdrawal of troops from Afghanistan, and tariffs on China. On the specific policy toward China, the two did not exaggerate excessively. Trump questioned Biden on trade deficits and the Fentanyl issue while Biden claimed to have "reduced the US-China trade deficit to the lowest level since 2010" during his term in office.

• In terms of policy style, Trump has recently made some concessions on sensitive issues, and former core members of the Trump team have also provided a theoretical explanation for MAGA, which can be followed up. Trump's potential vice presidential candidates should be noted.

(1) Looking at Trump's recent policy positions, he intends to downplay extremist colors, which may be a campaign strategy when leading in the polls. For example, on the issue of immigration, Trump said on June 20 that foreign students who graduate from American universities should be allowed to receive green cards; he also deliberately avoids extreme expressions on abortion rights.

(2) Many former core members of the Trump team have also provided a theoretical explanation for MAGA, incorporating many policy proposals into the traditional political framework of the United States, further downplaying extremist colors. For example, Robert Lighthizer, the former trade representative, published a book called "No Trade Is Free: Changing Course, Taking on China, and Helping America’s Workers," in which he combined launching tariffs on China with protecting American employment opportunities and dealing with climate change as "progressive goals" in order to demonstrate the justification of Trump's policy towards China within the traditional political framework.

(3) On the issue of vice presidential candidates, although Trump claimed to have already selected a candidate, he has not officially announced it. According to reports from media such as CNBC, potential candidates include Doug Burgum, the governor of North Dakota, J.D. Vance, the federal senator from Ohio, and Marco Rubio, the federal senator from Florida. They are all supporters of Trump's MAGA program, and their positions on economic, diplomatic, and social issues are basically the same as those of Trump.

• Regarding congressional elections, some primary elections have already begun in certain states recently, but the uncertainty of congressional elections is higher than that of presidential elections and may require observation closer to the time.

In terms of election arrangements, all 435 seats in the House of Representatives and 33 seats in the Senate will be elected on November 5, 2024. Several states, such as Colorado, New York, and Utah, have already opened primaries to determine the candidates of each party in the congressional elections. According to Race to the WH's forecast as of June 27, 2024, the Democratic Party is expected to win 219.2 seats in the House of Representatives, while the Republican Party is expected to win 215.8 seats; in the Senate, the Democratic Party is expected to win 48.1 seats and the Republican Party is expected to win 51.9 seats, ultimately possibly leading to a new "divided congress." However, since congressional elections are more scattered, with fewer samples and greater prediction difficulties, observation may still be required regarding the outcome of both houses.

• Regarding export impacts, since the imposition of additional tariffs by the Biden administration in May, foreign trade companies have shown signs of "grabbing exports." Subsequently, follow-up attention is needed for a new round of "grabbing exports" phenomena surrounding Trump's return, and total exports from China this year are expected to increase by approximately 4.0%.

(1) Looking back in history, in March 2018, then-U.S. President Trump signed a presidential memorandum that planned to impose tariffs on a large scale on goods imported from China based on the results of the "301 investigation." In July and August 2018, the United States imposed 25% tariffs on $50 billion worth of goods imported from China in two batches. In September 2018, the United States announced a 10% tariff on $200 billion worth of Chinese goods imported into the United States, and announced that the tariff will be raised to 25% in January 2019. From the first quarter to the third quarter of 2018, under the influence of the effect of "grabbing exports," China's exports to the United States achieved relatively rapid growth rates of 13.6%, 11.3%, and 12.9%, respectively. The impact of tariff drag had already been reflected in the fourth quarter, with export growth to the United States falling to 6.3%. In 2019, China’s exports to the United States fell by 12.5% year-on-year, a decrease of 23.8 percentage points from 2018. From the perspective of industries, exports of light industry manufacturing (leather and fur manufacturing, furniture manufacturing, food manufacturing, papermaking) and electromechanical products (audio and video equipment, optical medical equipment, and vehicle transportation equipment manufacturing) were largely affected by the imposition of tariffs, with a significant decrease in export growth to the United States in 2019.

(2) Looking at the present, in May 2024, the United States released the results of a four-year review of the 301 tariffs on China, announcing that it will further increase tariffs on electric vehicles, lithium batteries, photovoltaic batteries, key minerals, semiconductors, and steel and aluminum, port cranes, personal protective equipment and other products imported from China. Since May, the readings of the China Containerized Freight Index for the US East Coast and US West Coast shipping routes have maintained a relatively rapid increase year-on-year, indicating that foreign trade companies may have engaged in some "export grabbing" behavior.

(3) Looking ahead, with the expectation of a "return of Trump" and the continued fermentation of foreign trade companies after this debate, this may make foreign trade companies more worried about Trump's comprehensive tariff threats, thus intensifying their efforts in the third quarter to hoard goods in overseas markets. For exports, we believe that major overseas economies have gradually begun to enter a restocking cycle, and the degree of dependence of "Belt and Road" economies on Chinese imports is still increasing, coupled with foreign trade companies' joint support for "grabbing exports," the trend of exports is expected to gradually rebound this year, and China's total exports for the year are expected to increase by approximately 4%.

• In terms of Sino-U.S. relations, although the U.S. election has entered a "white-hot" stage, geopolitical risk still needs time to be digested by the market, but Sino-U.S. relations will still operate under the main theme of "competition without conflict" this year.

(1) In the short term, the "new period of turbulence and change" begins to appear in reality under the influence of a series of electoral activities in 2024, and the U.S. election will become the main focus affecting global situation in the second half of this year, with geopolitical risks still needing time to be digested by the market.

We expect that although the US election has entered a "white-hot" stage, Sino-US relations will still operate under the main theme of "competition without conflict" within the year. The substantial impact is controllable, and emotional disturbance is the main factor.

On the one hand, the policy towards China may become one of the important topics for candidates from both parties in the United States to hype, to show a "tough" attitude and to win the support of voters, especially in debates, rallies and other occasions, where candidates' remarks on China-related policies may attract market attention.

On the other hand, against the backdrop of the continued Russia-Ukraine conflict and the uncertain situation of the Israeli-Palestinian conflict, the Biden administration may need to avoid further igniting regional conflicts in the Asia-Pacific region, which could further impact its own election prospects, and maintain a balanced policy towards China.

In the long run, in addition to the short-term results of the US election, we should observe the changes in the social and domestic and foreign policy trends in the United States through the US election, and then deduce their long-term impact on the global situation.

On the one hand, the systematic decline in the credibility of the United States' commitments to global issues, coupled with the increasing demands of third-party countries for strategic independence, will create new opportunities for our country's diplomatic breakthroughs and Chinese enterprises' internationalization effort.

On the other hand, the global power vacuum and imbalance caused by the decline in US control will also lead to frequent local geopolitical conflicts, and the persistence is relatively strong.

• Investment strategy:

Uncertainty in the US election results; worse-than-expected deterioration of the US economy; and the unexpected intensification of Sino-US geopolitical game.

Editor/Somer