Toscafund Asset Management believes China has the “fiscal and monetary ammunition” to turn around its deteriorating economic picture, in contrast to other global heavyweights.

Last year was poor economically for the US, Europe and Asia, but China stands out for its potential to boost growth, according to partner and chief economist Savvas Savouri – unlike other places where “armouries are empty”.

Chinese rates remain relatively high at 4.35%, giving more scope to cut than others. “Bear in mind, they have been at this rate since October 2015,” he told EuroHedge. “True Reserve requirement ratios have been cut, and other monetary loosening has happened, but not a cut to the headline rate.”

While cutting rates could be interpreted as a panic move by markets, Savouri believes the measure would be well-received, supporting rather than weakening the renminbi.

“Remember, over the last year or so the latter has come off against the dollar,” he added, noting that a rate cut in China could force Hong Kong to think about its strict dollar peg policy.

Savouri’s bullish sentiment on China comes against a backdrop of mixed views on the outlook for the Asian giant in 2019. Last week, Apple attributed its 9% share tumble – which wiped some $75bn off its market capitalisation – to lower demand for its iPhone products in China, with muted middle-class consumption to blame.

His words emerge as two days of trade talks between the US and China begin in Beijing. The arrest in Canada last month of Meng Wanzhou, CFO Chinese tech firm Huawei, escalated tensions in a simmering trade dispute between the countries that has muted expectations of global growth in 2019.

Savouri lauded China’s handling of previous crises.  “Beijing dealt with the 2008 crisis in a remarkably mature way, and in my view contributed greatly to the calming of panicked markets and putting the global economy back on its feet. I am convinced It will do so again.”

He also expressed optimism on South Korea, adding the continued thawing of relations with its northern neighbour is partly orchestrated on the North Korean side by China.

“Over in the US, I fear Powell and the Fed are tightening as much to prove their independence of political interference as the actual need to do so for economic reasons,” he said. “If China is indeed going to add fuel to its domestic engine then US corporate giants – capital good, consumers and tech – can hardly fail to benefit in their overseas and export earnings.”

Toscafund was founded in London in 2000 and manages about $4bn.

Toscafund strikes bullish tone on China as US trade talks begin on EuroHedge.