China: A temporary truce – Nordea Markets

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Amy Yuan Zhuang, research analyst at Nordea Markets, suggests that while the ceasefire in the US-China trade war is a positive first step and offer some relief to the growth outlook, a profound and sustained agreement is far from certain.

Key Quotes

“The Trump-Xi meeting on the sideline of the G20 summit delivered much-needed good news: a 90-day ceasefire in the US-China trade war.”

“We are skeptical about whether a permanent resolution can be reached in such a short time period. The core of the dispute, China’s rapid and unfair technological development, is a complicated matter and driven by different incentives. It is not easy to find common ground.”

“The ceasefire is good news for the short-term growth outlook. It will help stabilising confidence among businesses and consumers. As the trade war has not ended, there is little room for upside surprises to growth.”

“The CNY, just like Chinese stocks, enjoy a boost from the news about the truce. However, the rally may prove short-lived and flimsy because the ceasefire has merely postponed but not removed uncertainty about the trade war.”

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