China: No bad news is good news – Nordea Markets

The China-US trade talk in early May did not result in fruitful outcomes and given the depth and complexity of the dispute, no bad news is good news, according to Amy Yuan Zhuang, Research Analyst at Nordea Markets.

Key Quotes

“We expect tensions to persist for a while but see small likelihood of a significant escalation.”

“Momentum in the Chinese economy remains solid, but there are signs that a slowdown later this year is inevitable.”

“The world attention is still on the trade dispute with the US. A first round of negotiations between trade representatives in early May has not led to any remarkable progress, so tensions will linger for a while. We still do not expect a full-blown trade war. Neither do we believe that the FX reserves and the currency will be used as weapons.”

“We are more concerned about the actions that might be taken to restrict bilateral direct investment, especially in technology-related sectors. Rising protectionism will likely hurt global growth in the long term.”

“Domestic growth drivers are gradually fading away.”

“The CNY will likely continue to be driven by the USD. We still expect medium-term strength in the yuan against the dollar.”