China has blinked.
On Tuesday, Beijing has returned a U.S. underwater drone taken by one of its naval vessels in the disputed South China Sea last week after what it said were friendly talks with the United States, which reiterated its criticism of the "unlawful" seizure. The move could diffuse tensions after protests from the White House and critical tweets from President-elect Donald Trump.
On Saturday morning, the Pentagon was eager to announce that China would return a U.S. Navy underwater drone after its military scooped up the submersible in the South China Sea late this week and sparked a row that drew in President-elect Donald Trump. As previously reported, Pentagon spokesman Peter Cook said that “through direct engagement with Chinese authorities, we have secured an understanding that the Chinese will return the UUV to the United States."
In addition to its now traditional credit-funded boom-bubble-bust cycle which rotates from asset to asset, and is then promptly recycled courtesy of the nearly $35 trillion in various financial system "assets", another staple of the "new" Chinese economy are smog alerts following every burst in economic strength driven by "old economy" manufacturing.
Update: moments after the original post, Trump has corrected his spelling error in a follow up tweet which, correctly, accuses China of engaging in an "unprecedented act" by seizing the US naval drone.
China steals United States Navy research drone in international waters - rips it out of water and takes it to China in unprecedented act.
— Donald J. Trump (@realDonaldTrump) December 17, 2016
One day after China's regulator halted trading in bond futures for the first time ever, Beijing suffered another catalytic bond-market event overnight when it failed to sell all the Treasury Bills on auction Friday, for the first time in almost 18 months, as bids fell short of minimum requirements, according to traders required to bid at the auction.