There is a "very high probability" that US president Donald Trump will strike a trade deal with Chinese premier Xi Jinping in less than one month's time at the APEC Forum in Chile, according to Matthews Asia's Andy Rothman.
Rothman, who is an investment strategist at the firm, added that even if the negotiations fail, Q3 2019 economic data suggests that China has the capacity to "mitigate the impact of a broader dispute and maintain the world's best consumer story".
It follows months of discord between the world's two largest economies, with Trump last escalating the dispute in August when he imposed a further $300bn of tariffs on Chinese goods and triggered global market volatility.
It is likely that some form of a deal will be reached"
"My assumption is that when they meet it will result in an agreement that allows both sides to lift all of the tariffs," Rothman said.
"It is likely that some form of a deal will be reached. But even if the negotiations fail, third-quarter macro data suggests that China has the capacity to mitigate the impact of a broader dispute and maintain the world's best consumer story."
For Rothman, a deal is in the best interest of both parties, with Trump motivated by re-election prospects, and Xi hoping to avoid any potential setback to China's economic growth.
He said: "Trump appears to recognise that a deal is better than no deal… no deal would mean continued taxes on Chinese goods… a continued Chinese boycott of American soybeans, which is contributing to harsh conditions for farmers in politically important states.
"The tariffs are not a huge problem for Xi, but failure to conclude a deal would open up the risk that a trade war leads to restrictions on China's access to American tech, which would be a setback for China's economic growth."
Rothman added: "Any deal that meets the very low bar of getting us back to where we were two years ago would be satisfactory."
The investment strategist pointed out that China accounts for one-third of global economic growth, which is a much greater proportion than the combined share of growth from the US, Europe and Japan.
While a tainted longer-term relationship between China and the US could therefore have "a profound impact on the global economy", he said China remains insulated to this, with net exports last year equalling less than 1% of its GDP.
In addition, Rothman said China's tertiary element of GDP, consumption and services, has been the biggest contributor towards the country's growth for eight consecutive years, with the sector accounting for 75% of GDP in 2018.
"Over the last decade, real income rose 120% in China, compared to a 17% increase in the US and just 3.5% in the UK," he explained.
"I think the consumer story is sustainable, in part because Chinese households still save about 27% of their disposable income, compared to an 8% savings rate in the US."
"Household consumption - a metric that includes services as well as goods - rose 9.9% year-on-year in Q3 2019, up from 7.3% in Q1 2019 and 8% a year ago."
A prime example of China's consumer strength, according to Rothman, is the success of US footwear manufacturing company Nike in the country, which has achieved double-digit revenues for 21 consecutive quarters across Greater China.
Rothman said this consumer story has been "fuelled by phenomenal income growth"; a trend that has largely been driven by an increase in entrepreneurs, with small private companies responsible for 87% of urban employment.
"100% [of] new job creation comes from these private companies because the state sector is still shrinking every year," he added.
The investment strategist also believes Beijing is not worried about the Chinese economy more broadly due to the lack of "key stimulus levers [being] pulled."
"Credit is not tight - it is rising faster than nominal GDP growth. This leaves room for stimulus should growth slow more sharply if the trade dispute worsens. The government has so far refrained from turning on its traditional public infrastructure stimulus taps, rising only 4.5% during the first three quarters - much lower than the 19.8% pace two years ago."
Meanwhile, the investment strategist said China is "manipulating its currency", but added there is "no question" the country is doing this in a way that is beneficial for the US.
"Effectively, what China has done is acknowledge that the direction of their currency, the renminbi against the dollar, is determined entirely by the strength of weakness of the dollar.
"If the dollar is strong, the renminbi will be weak against the dollar, and the opposite. This year, for example, the dollar is up about 3% and the renminbi is down against the dollar by about 3%."
Another tailwind to consider, according to Rothman, is that China is looking for ways to assist and improve its financial sector.
"They have experimented with all sorts of things… bank quotas… incentives to lend more. This is not an anti-private sector, this is: 'how do we balance supporting the private sector without taking risks that could take down the whole economy 20 years from now?' This is no longer a communist party that has a communist ideology."
This article was first published by InvestmentWeek, a sister title to International Investment.