Although the yuan has rallied after the announcement of a Phase One trade deal, balance of payments data for Q3 2019 highlight why China’s currency will remain under pressure to depreciate in 2020: outflows from diversification of savings persist while portfolio inflows from the rest of the world are not large enough to offset them. Outflow pressures are weaker than in 2015 and 2016, but are still likely to accelerate as monetary easing continues and interest rates fall, even if there is further progress in trade negotiations.
