China seems to be losing the trade war with Trump.
Experts say this: China will not survive a long struggle with the United States.
The most important move was the success of Trump last week: the US-EU agreement on reconciliation in trade. At the meeting, the agreement on the purchase of soybeans and liquefied gas from the US was made but the main issue seems to be not about this. The main thing is that the US and the EU agreed to "work together against unfair trade practices." It is not hard to guess that this is a joint pressure on China.
The economy and markets of China are nervous, as the China's stock market is minus 25% from the beginning of the year. The default level on bonds of Chinese companies are at highs. The government is trying new injections to support the pyramid of the huge debt of businesses and regions. This is very similar to the real financial pyramid.
Therefore, the main vulnerability seems to be pointed out to the yuan.
It appears that the worsening of Chinese trade conditions should stimulate the fall of the yuan to the dollar, and thereby compensate for the problem. But there is a problem with the depreciation of the renminbi: the outflow of foreign capital.
If the renminbi rate starts to drop noticeably towards the dollar, this could cause a significant foreign capital outflow from the Chinese market and, in turn, will push the yuan further down. The fall of the renminbi may reach a considerable amount.
It is suggested that it is time for China to take steps to reconcile with the US. Either way, prepare for very hard times.
Let's also note that if China's economy had a sharp decline, it will become painful for the entire world economy and will hit the US as well.
* The presented market analysis is informative and does not constitute a guide to the transaction.
The material has been provided by InstaForex Company - www.instaforex.com