China Publishes Document Blaming the US For Trade War

China Publishes Document Blaming the US For Trade War
June 3, 2019

 

The Chinese yuan started weakening against the greenback on the last day of the trading week, mainly due to the release of discouraging economic data, and also the unresolved trade issue with the US. Notably, so far in the second quarter of 2019, the yuan has remained weak against the US dollar but has gained against the euro. For China, the trade and geopolitical news continue to see a mix of highs and lows in 2019. From a low of 6.9218, the USD/CNY pair rose to a high of 6.9366 on Friday.

In the US, the manufacturing Purchasing Managers’ Index (PMI) dropped to 49.4 in May, down from 50.1 in April, as per the data published by the National Bureau of Statistics (NBS). The data is noteworthy because a reading below 50 signifies contraction in economic activity. As a relief, the non-manufacturing PMI was 54.3 in May, unaltered from the previous month.

On the subject of trade talks with China, it is amply clear that both sides are no way near arriving at a new trade deal. The Chinese side accused Trump of engaging in “naked economic terrorism.”

While interacting with reporters in Beijing, Chinese Vice Foreign Minister Zhang Hanhui pointed out that China is against the use of “big sticks” like trade sanctions, import duties, and other protectionist policies.

When questioned about the trade war with the US, Zhang said: “We oppose a trade war but are not afraid of a trade war. This kind of deliberately provoking trade dispute is naked economic terrorism, economic homicide, economic bullying.”

Regarding the impact of the trade war on the economy, Zhang said: “This trade clash will have a serious negative effect on global economic development and recovery.”

Yesterday, China published a detailed white paper explaining its stance on the trade issue. The white paper squarely blames the US for setbacks in trade talks. More importantly, the document asserts that China will fight the US as long as required.

Markets are now starting to debate the possible outcome if the yuan declines below seven against the US dollar. Analysts have pointed out that this could result in considerable economic costs for the Chinese companies and also the government. As the financial regulators are getting ready to do what it needs to prevent such a scenario from happening, analysts expect Beijing to impose strict capital controls.

The market will be closely watching for the Caixin China General Manufacturing PMI, the Caixin Composite PMI, and the Caixin Services PMI data that will be released later this week. Analysts expect all three indexes to have a reading that signifies expansion, even though the general anticipation is that it will be only slightly changed from the earlier month.

The yuan is expected to remain volatile until the trade war is resolved with the US.

yua - technical analysis - 3rd June 2019

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Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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