Beijing is taking extensive measures to stabilise the economy, through the central bank, local governments and an enormous tax-cut package. Already, some indicators seem to be responding to stimulus, which bodes well for global trade.

The Chinese central bank’s new policy tools are clearly meant to encourage banks to extend credit to small businesses. It is a striking change in policy direction, after years of focusing on state-owned enterprises.

With Beijing still struggling to control the debt that swelled as a result of its 2008 rescue package, it has no appetite for more debt-fuelled stimulus. One way to increase domestic demand is to reduce the tax burden.

Beijing is willing to pay the price to ease trade tensions with Washington and buy more time for economic development. But unresolved issues between the two sides mean the trade dispute may not go away in 90 days.

The ‘very good conversation’ on trade between the US and Chinese presidents has eased market fears. However, the market is hesitant to take the US president too seriously, and the Chinese currency’s outlook remains uncertain.

The outlook for the Chinese economy is weak, as consumption falls and the deleveraging campaign stalls. Chinese policymakers need to come up with longer-term solutions and convince the market of China’s commitment to economic openness.

While history and recent moves by the People’s Bank of China indicate the country will prop up the yuan, the currency is unlikely to appreciate significantly any time soon.

Chinese policymakers torn between spurring growth and pushing financial deleveraging should first differentiate bad debt from good – they should reform the state sector, but also provide help to ease companies’ cash flow.