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Analysts at Nomura note that following high-level talks in Washington, China and the US released a joint statement on Saturday indicating that they reached an agreement to “substantially” reduce the US trade deficit with China by “substantially” increasing its purchases of US goods and services, especially for energy and agricultural products.

Key Quotes

“We believe making a commitment to significantly increase imports from the US is the best strategy for China, which needs to deleverage while delivering stable growth.”

“Increasing imports should have a limited impact on China’s growth, while opening China to foreign goods, services and investment will, on the whole, serve China well. Any impact on current account balance might also smaller than commonly expected.”

Strategy implications? On FX, this de-escalation of Sino-US trade tensions – along with continued foreign portfolio inflows into under-owned RMB-denominated financial assets in a stable macro environment – suggests there is room for RMB to outperform. Against the current backdrop of broad USD strength, we express our bullish RMB view through long CNY against a CFETS basket and long CNH against SGD.”