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Matthews Asia - Sinology

The U.S.- China trade deal announced this month is disappointing. What does it mean for investors?

A disappointing deal, and a healthy economy


Matthew Asia's Investment Strategist, Andy Rothman, thinks it's merely the best trade deal in the last 36 months of Chinese history. Based on the few details provided so far, the deal doesn't appear to represent a significant improvement on the current trade framework. 


The uncertainty of how this will evolve, and how Trump will respond, means that this deal is unlikely to reassure American and Chinese CEOs, who have been deferring CapEx in response to uncertainty over the bilateral trade dispute. Removing that uncertainty was the negotiators' top job, and they appear to have failed. 


In spite of this, Andy thinks that failure to reach any deal would have a profound impact on the global economy. He will be less worried about the near-term impact on China, as the main engine of its growth — domestic demand — remains healthy, and Beijing has a significant store of dry powder it could deploy to mitigate the impact of an all-out trade war with Washington.


Key Points:


  • The trade deal is disappointing, because its sets unrealistically high goals for American exports to China, so the risk of failure and a return to tariff battles remains, leaving corporates in both countries unlikely to feel secure enough to resume investment spending.
  • There are also no signs that the two sides are preparing to use this pause in the dispute to reconsider the poor direction the bilateral relationship is taking, towards decoupling and confrontation.
  • Despite the disappointing deal, Andy Rothaman expects the consumer-driven Chinese economy to remain healthy in 2020, and Beijing is preparing only a very modest stimulus designed to stabilize growth.


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Important Information:

Sources: Matthews Asia, CEIC 

The views and information discussed in this report are as of the date of publication, are subject to change and may not reflect current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. Investment involves risk. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Past performance is no guarantee of future results. The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Matthews Asia and its affiliates do not accept any liability for losses either direct or consequential caused by the use of this information.


, Investment Strategist

Andy Rothman

Investment Strategist,
Matthews Asia

December 2019

Please note that these are the views of Andy Rothman for Matthews Asia and should not be interpreted as the views of RL360.

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A range of Matthews Asia funds can be accessed through our guided architecture products Regular Savings Plan, Regular Savings Plan Malaysia, LifePlan, Oracle, Paragon, Protected Lifestyle, LifePlan Lebanon, Protected Lifestyle Lebanon, Quantum, Quantum Malaysia and also through our PIMS portfolio bond.