China Outlook April 2019

Global Growth Outlook Bodes Well for Chinese Assets. China has coped with slowing economic growth and trade tensions by allowing its currency to depreciate by the minimum amount that allows its foreign reserves to remain stable around $3 trillion. This policy has helped preserve China’s large trade surplus with the United States, frustrating President Trump’s efforts to reduce this imbalance. All signs continue to suggest, however, that the Chinese would prefer the CHN/USD exchange rate to be closer to 6.30 than its current 6.72 valuation. If the Chinese economic outlook improves or if there is a deal that ends trade tensions, we expect the Chinese to push for a stronger yuan.