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Overnight offshore Yuan HIBOR breaks YTD levels

September 30, 2019, | AtoZ MarketsThe overnight offshore Yuan Hong HIBOR surged 1.2% points to 3.04% and recorded the biggest daily rise year-to-date (YTD) levels. The currency borrowing costs rose in Hong Kong on Monday morning, with the CNH Hong Kong Interbank Offered Rate benchmark (HIBOR) rising across tenors.

The overnight contract jumped to 4.07150% to reach the highest level since October 9th, 2018. It was 58 basis points above the previous fix of 3.48975% on Friday. 

The massive hike in the CNH HIBOR suggested tightness in Yuan liquidity offshore. This could mean that shorting the Chinese currency has become more expensive.

Read more: Royal Chief Analyst: EA Trading requires strong money management

On January 29th, 2019, the overnight offshore Yuan HIBOR dropped to 0.33%, which is the lowest level. The reason behind the fall was fears among the overseas investors that Beijing is preparing for a far deeper devaluation in the Yuan.

US-China trade tensions might impact Yuan 

We have a macro calendar to kick-off a big week ahead, with the German economic news in the headline which amid Brexit chaos and renewed US-China trade tensions. First up, the German Retail Sales will drop in at 0600 GMT, followed by the Employment data due at 0755 GMT and Preliminary Harmonized Index of Consumer Prices for September at 1200 GMT.

From the UK docket, the Q2 Final GDP revision, Current Account and Total Business Investment data will be reported at 0830 GMT among other minority reports.

China Tightens Penalties Against Illegal Foreign Exchange Trading

February 14, 2019, | AtoZ Markets – According to the local news sources, China has begun cracking down on individuals and corporations that buy or sell foreign currency on the black market. How the new foreign exchange regulations in China could be interpreted and what are the criminal penalties for illegal foreign exchange trading in this country?

New penalties in brief

Representatives of the authorities of the Middle Kingdom explain the need of the new regulations by saying that the government seeks to control the outflow of capital and maintain stability of the exchange rate of the yuan and the slowdown of its economy. According to the joint judicial interpretation of the Supreme Court and the Supreme Prosecutor’s Office, which entered into force in early February, illegal trade in the Forex market will be criminalized and those who involved in illegal business activities.

A total transaction amount of 5 million yuan (737,000 US dollars) or illegal profits of 100,000 yuan (14,749 US dollars) will be considered a “serious” crime and provide for imprisonment of up to five years and a fine of up to five times profits.

An “extremely serious” violation, defined as cumulative transactions totaling more than 25 million yuan (3.69 million US dollars) or 500,000 yuan (73,745 US dollars) in the form of illegal profits, can be punished with imprisonment of more than five years and a fine of up to fivefold profit or confiscation of property.

An “extremely serious” violation, defined as cumulative transactions totaling more than 25 million yuan (3.69 million US dollars) or 500,000 yuan (73,745 US dollars) in the form of illegal profits, can be punished with imprisonment of more than five years and a fine of up to fivefold profit or confiscation of property.

The announcement of an increase in penalties was made before the beginning of the week on a long lunar New Year’s holiday, during which the demand for foreign currency rose sharply, as more than six million Chinese traveled abroad.

Strict regulations supposed to maintain yuan stability

Beijing strictly controlled capital outflows, since the massive capital outflow in 2015–2017 had a serious downward pressure on the yuan, forcing the authorities to spend at least one-fifth of the country’s currency reserves to protect the currency.

At the moment the Chinese government allows each person to buy up to $ 50,000 a year in foreign currency and prohibits large “irrational” outgoing investments, such as the purchase of hotels, real estate, sports clubs and entertainment facilities.

Shen Jiangang, chief economist at JD Digits, explained a new government initiative to tighten the rules for currency trading saying following:

“Government rules “were established to prevent illegal capital outflows and maintain the stability of the yuan”

Despite China-US trade war, Shen predicts that the RMB exchange rate will rise to 6.5 against the US dollar by the end of the year, which is far from the market panic three months earlier, that the currency will fall below 7 to the dollar. In recent months, capital inflows have increased significantly, which means that foreign investors have gained greater access to the country’s equity and bond markets through the Hong Kong Connect program.

New Chinese policy will minimize risks from uncontrolled market operations

According to China Merchants Securities, foreign institutions increased their ownership of RMB-denominated bonds by 582.5 billion yuan (85.91 billion US dollars), an increase of 68% over the same period last year. In addition, foreign parties invested about 300 billion yuan ($ 44.25 billion) in the Chinese stock market through Stock Connect programs and qualified foreign institutional investors last year. China’s central bank is trying to invest an additional 110 billion dollars in the economy. Tan Yalin, president of the China Institute for Investment Research in Forex, based in Beijing, noted that the government’s policy supposed to prevent financial risks from unregulated shadow market operations. “The black market poses a threat to the banking foreign exchange market and the government’s control over capital,” said Tan.

“Underground banks are one of the main ways people in China use to transfer money from the country, and therefore they are the main goal of suppressing the government in recent years”, president of the China Institute for Investment Research in Forex added.

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China Seeks Yuan Dominance In Commodities Pricing

The US Dollar has remained the default trading currency for oil and most other products while the Chinese yuan had little to do with the purchase of the world’s most traded commodity. Right about now, China Seeks Yuan Dominance In Commodities Pricing. What integrated factors qualifies the Yuan for this significant evolution? Let us see!

5 April, ADS Securities – A report issued by the strategic studies department in ADS securities points towards China’s significant evolution by moving forward to price commodities with the Yuan, in which case will strengthen its global position, not only as the world’s largest manufacturer and economy but also in controlling the pricing process in Chinese currency due to a number of integrated factors mentioned below.

China Seeks Yuan Dominance In Commodities Pricing

For starters, China took its first strategic pace on Monday, March the 26th, where it priced the shanghai oil exchange with the Yuan and 14.5 million barrels were traded on just the first day, accounting for 5% of the world’s oil trade. The US occupies 72% and London with 23%, yet yesterday this figure rose in China with more than 25 million barrels traded to reach the global share of only 8% in the first week.

The report sheds light on how China’s move will pave the way to price other raw materials and commodities, topped by gold as it holds the world’s 5th largest reserve of gold in the world by up to 1800 tons, which rose by 300% compared to 2008.

In addition to gold, China dominates a very high consumption of raw materials, accounting for 50% of global consumption of steel, 47% of aluminum, 50% of coal, 27% of gold and 14% for oil. Which allows it to control the pricing process.

Besides China dominates around 40% of mines in Africa, 18% in Australia, 30 % in Asia and 9 % in the US. China is also the largest consumer of agricultural materials managing to control 2.5 million hectares of farmland in the world enough to make it the largest acquirer of agriculture producing land in the world. Followed by the US and Europe.

The strength of the Chinese Yuan

If all final steps were accomplished and China was able to price commodities with the Yuan, the Yuan will most definitely surge to be a reserve currency versus the USD. Even in a world where the dollar dominates 75% of the world’s cash flow and 10% for the Yuan, with such indications show that the Yuan’s value is likely to take up 30% instead of 10% in the world’s cash flow.

In a simple review of the shift in China in 1980, the annual income per capita in the US was $12,500,  42 times more than the Chinese citizen being only $302 but today the difference is only presented by a double.

The report also pointed out that the ADS strategic department was the first to highlight the importance of the development of the Chinese economy as a key driver of the global economy since October 2013, noting the significance of the Chinese currency as a reserve and savings note, that will take a leading position amongst the main basket of currencies after the USD and the Euro.

Yuan – One of the most central saving currencies

In a study conducted by the strategic department, signifying the strength of the Yuan, the study points out the Chinese currency is the only one to overtake the worlds currencies against the USD, as most of these currencies fell by 30 to 40% such as the sterling while the Yuan lost only 12% of its value VS the dollar.

Moreover, the report suggests that the Chinese Yuan has strengthened its role as a savings currency since 2013, in fact, today, its seen as one of the most central saving currencies where its savings rate increased by more than 60% since 2013, as a result of China’s strategic position and its pivotal roles in the global economy by having clearing and settlement centers with the Yuan in all major financial centers in the world today.

The Chinese economy is Stable – Grew by 6.9%

Lastly, China’s economy is at the center of the global economic stability. Given China’s growing role in international trade and financial systems. By being the most active and growing among all the world’s economies, although growth rates fell below 7% but still three times higher than in the rest of the world.

Statistically, the Chinese economy grew 6.9% better than expectations of 6.6% and the industrial production rose up to 7.5% the highest since 2015. And exports rose by 11.3 % exceeding the forecast of 8.9% raising the trade surplus to 45 billion dollars.

ADS Securities Risk Disclaimer

This article was provided by analysts of ADS Securities.

Trading foreign exchange, foreign exchange options, foreign exchange forwards, contracts for difference, bullion and other over-the-counter products carries a high level of risk. All opinions, news, analysis, prices or other information contained in this communication are provided as general market commentary. It does not constitute investment advice. Nor a solicitation or recommendation for you to buy or sell any over-the-counter product or another financial instrument.

Bank of Russia added yuan to reserve currency basket

30 November, AtoZForex.com, Paris – According to the Russian news agency Tass, two sources close the Central Bank of Russia has informed that the bank already added the Chinese yuan to its reserve basket as of mid-November. Marking a move before today’s decision of the International Monetary Fund’s (IMF) to include the yuan to the Special Drawing Rights (SDR) basket. However, the press service of Russia’s Central Bank has indicated that the composition of reserves is to be officially unveiled with a six months delay. Hence, it is not confirmed if the Bank of Russia added yuan to reserve currency basket. 

Yet, according to the two sources, the share of Russian reserves in the Chinese yuan is to remain small and symbolic for the near term. That’s why they have stated that at the moment, the Central Bank of Russia has not carry out operations on the physical buying of the Chinese yuan, while it is also not planning to purchase operations of yuan-nominated assets. Therefore, no actual signs and evidence of the yuan inclusion by the Bank of Russia is noticed at the moment.

Opposition against the yuan inclusion

Providing more details upon the inclusion of the yuan, both sources told that a number of the bank’s board members were against the inclusion of the yuan in the basket. Especially, Mr. Ksenia Yudaeva, the First Deputy Chairman of the Central Bank noted that the yuan is unusable in the formation of international reserves due to its non-reserve status.

As it is essential that the currency used for the investment of reserves needs to be free floating. However, with the IMF having approved the yuan to the SDR today, the yuan is meeting the yardstick to be “freely usable”. It seems like the opposition has been overruled correctly. 

The benefits for Russia

Even though the yuan inclusion is not confirmed yet, the move comes is very logical. Considering that it would further facilitate both countries to engage in investing and buying of national denominated currency assets. Especially, for Russia this would alleviate the deficit in technologies, petroleum and gas per the restrictions to western markets brought on by sanctions after the events in Ukraine.

Now that the IMF has added the yuan to the SDR basket, it doesn’t matter anymore if the Bank of Russia yuan is confirmed or not. The yuan’s new status will not be neglected, hence it is likely that the Bank of Russia will have the yuan in its reserve currency basket eventually.

Think we missed something? Let us know down in the comments section.

China devalues Yuan sending the dollar higher

USDCNH Daily chart USDCNH Daily chart

11 August, AtoZForex.com, Lagos – Starting out this busy week, two influential FOMC members spoke, as the USD reflected market’s perception. Based on the ideas passed across by Federal Reserve Governor Stanley Fischer as well as Federal Reserve Bank of Atlanta President Dennis Lockhart.

Stanley Fischer’s speech

Mr. Stanley Fischer reiterated that the federal reserve is currently closely watching inflation, with the current low level being of the concern. The Fed will not raise rates, as it sees inflation returning to more normal levels, said Mr. Stanley Fischer, the vice chairman of the U.S. central bank, in a television interview Monday. “The interesting situation in which we are is that employment has been rising pretty fast relative to previous performance and yet inflation is very low. And the concern about the situation is not to move before we see inflation as well as employment returning to more normal levels,” he said. If the Fed were focused solely on inflation, it would have to try to be more accommodative, if that was possible, Mr. Stanley Fischer told Bloomberg TV. The economy still hasn’t returned to normal times, but “we hope to be doing that,” Mr. Stanley Fischer said.

Mr. Stanley Fischer agreed with the notion that the economy needs to be reflated, but does not support a 4% annual inflation rate target. Considering, he believes that the current low inflation level can be attributed by and large to the decline in the price of oil as well as raw materials. “These are things which will stabilize at some point, so we’re not going to be as low as we are now forever,” he said. But he added the data has to drive decisions. Global disinflation “is a factor that bothers us,” he said. “It is not inevitable, it is not baked in the economies abroad, but it is there right now,” he said.

Dennis Lockhart’s speech

Dennis Lockhart also spoke, pointing out that from its peak of 10 percent, the rate of unemployment has fallen to 5.3 percent. However, the average rate of inflation over the six-plus years of recovery has been 1 1/2 percent. He expects to see convincing evidence to emerge, displaying that inflation is rising to a safer level and approaching the FOMC’s 2 percent target. Lockhart reiterates that the economy has made great gains and is approaching an acceptable normal, and policy should shortly acknowledge this reality.

He is prepared to see mixed data, but he thinks the time to begin normalizing monetary conditions is close. He said: “I think the point of ‘liftoff’ is close,” “The economy has made great gains and is approaching an acceptable normal … conditions are no longer extraordinary. “I remain very disposed to September being a possible date for a liftoff decision,” Lockhart told journalists following the speech. Having reviewed these statements and releases, USD ended the day mixed against its major counterparts.

China devalues Yuan

In a surprise move, the People’s Bank of China devalued the Yuan, allowing it to fall to lows levels that was last seen in 2012. This drove the USD higher across board as the AUD fell alongside the yuan. The devaluation of the currency could provide a competitive boost to exports for the world’s second-largest economy.

On the other hand, Asian stocks turned mixed as investors considered the potential effect of the surprise move, which seemed to end months of officially sanctioned Yuan strength. China’s central bank set the midpoint for its currency at 6.2298 per dollar CNY=SAEC, down from Monday’s fix of 6.1162, and said it was aiming for a depreciation of 2 percent.

NAB Business confidence

Australia’s Business confidence and conditions have dropped back from recent strong gains, with Chinese economic jitters believed to be a key concern according to the NAB Business Confidence.

While confidence eased in most industries, much of the change stemmed from mining and construction firms (which includes a large share of non-residential and engineering firms), suggesting an escalation in Chinese growth concerns could be putting firms on alert,” they wrote in the report. This added to fuel the sharp fall in the AUD.

Other high impact news for the day include:

  • 9:00 a.m: German ZEW Economic Sentiment
  • 12:30 p.m: Prelim Unit Labor Costs q/q

IMF adds Yuan to SDR basket

30 November AtoZForex.com, Lagos – The Yuan has finally been included in the Special Drawing Rights (SDR) basket. The Chinese currency has been voted for inclusion by the International Monetary Fund (IMF), joining the US dollar, Euro, Pound and Yen. This is considered both a political and economic victory for the government of the world’s second largest economy. However, the official basket launch will be on Oct. 1, 2016, giving the Chinese government time to make further necessary adjustments and investors and stake holders to also adjust for the new changes.

As the IMF adds Yuan to SDR basket, it marks a big achievement for the Chinese government, agrees Prof. Kamel Mellahi at Warwick business school. He sees the move as a vote of confidence in the economic and financial reforms under way in China. But authorities, including the People’s Bank of China (PBOC) central bank, still have more work to do.

“The inclusion of the yuan in the basket of international currencies is a huge symbolic victory for China, but comes with strings attached to it,” says Mellahi, who researches business in China and other emerging economies. China has been loosening its tight grip on the management of the yuan for a while, but now the PBOC is going to come under immense pressure to be more transparent and improve its way of communicating with international markets. This requires massive cultural and procedural changes. Also, China will have to loosen its grip on the management of its currency and introduce a bunch of financial reforms.”

Inclusion criteria

Simply put, the SDR is an international reserve asset which the IMF uses to supplement its member countries’ reserves. With the Yuan SDR inclusion, the SDR comprises of five four international currencies, which can be exchanged for “freely usable” currencies. Inclusion in the SDR is considered by the IMF executive board every five years. The currency must be deemed as “a freely usable currency”. As explained by the fund, the goal is to ensure that it “reflects the relative importance of currencies in the global trading and financial systems”.

The Yuan’s SDR inclusion comes as expected, considering that the IMF had previously made its intention obvious. China has took necessary steps in recent time to earn this status of “freely usable”, involving a series of changes to liberalize the country’s financial markets. One of which is the People’s Bank of China’s surprise devaluation of the Yuan this year, allowing for the market forces to determine the currency value. For forex traders the yuan SDR inclusion will has vast consequences, not only becomes the currency pair more attractive to trade, it is expected be a truly international pair on the market. 

 

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Bank of America- Dollar rally not due to rate hikes expectation

In this Tuesday, Jan. 14, 2014, photo, a Bank of America sign is displayed in Philadelphia. Bank of America Corp. reports quarterly financial results before the market opens on Wednesday, Jan. 15, 2014. (AP Photo/Matt Rourke)

12 August, AtoZForex.com, Lagos – The USD has shown extended strength in the past year, rising as high as 20% in the last 12 months against a basket of major currencies. Many have attributed this move to impending rate hikes from the Fed as traders anticipate the move.

Could this be a case of buy the rumor and sell the news? According to some analysts, the real dollar move is yet to come, opining that there is still ample space for an upward move when the Fed actually raise rates.

Although many market observers have credited the surge in the dollar to the rate hike anticipation, Bank of America Merrill Lynch has a contrary opinion about the dollar rally. A study by the bank showed that only 3 percent of the dollar’s move can be ascribed to shifting Fed expectations. This opinion is based on an analysis of S&P 500 and Treasury note moves that sought to identify the catalyst behind any particular one-day day action. Even with this opinion, the global rates and currencies research team of BofAML also conclude that “The dollar has more room to strengthen when the Fed actually initiates hikes,” particularly given that other major monetary authorities like the European Central Bank and the Bank of Japan remain in easing mode.

“The thing about the currency markets is they tend to have very, very long cycles,” commented Boris Schlossberg, a currency trader at BK Asset Management. And given current central bank policy divergence, “the dollar definitely has a tail wind behind it—it’s definitely poised for further movement to the upside.” He also clarifies that since it is unclear the exact timing of the impending hikes, whether September or maybe later, the dollar may not make a good short- or medium-term buy.

The currency wars continue as China devalued the Yuan yesterday. In a surprise move, the People’s Bank of China devalued the Yuan, allowing it to fall to lows levels last seen in 2012. This drove the USD higher across board as the AUD fell alongside the yuan. The devaluation of the currency could provide a competitive boost to exports for the world’s second-largest economy.

Euro most affected by Yuan SDR inclusion

1 December, AtoZForex.com, Lagos – The Euro has recorded a tumble of about 13 percent against the dollar in 2015 so far, marking the largest fall in a decade. The group currency has dipped about 5.3 percent against the greenback in the third quarter alone. Also, central banks have reduced the proportion of the currency in their reserves to the lowest since 2002. The 19 nation currency is now expected to reduce in prominence as the Chinese Yuan joins the IMF’s Special Drawing Rights basket. The Euro’s dominance in the SDR basket will drop to 30.93 percent, from 37.4 percent, the organization said Monday.

The currency could also weaken further as the European Central Bank President Mario Draghi signaled on Oct. 22 that ECB policy makers are open to boosting stimulus, after embarking on a 1.1 trillion-euro ($1.2 trillion) asset-purchase program in March.

New SDR rebalancing

The Yuan is now set to exceed the yen and sterling in the new basket arrangement, while the dollar maintains almost the its current level. China’s currency will exceed yen and sterling in the new basket. The levels will be 41.73 percent for the dollar, 8.33 percent for the yen and 8.09 percent for the pound, the IMF said. At present, the dollar accounts for 41.9 percent of the basket, while the pound accounts for 11.3 percent and the yen 9.4 percent.

“The more likely impact is on euro holdings as the yuan, over time, is seen as the main alternative reserve currency to the dollar, replacing the euro in that role,” said Mansoor Mohi-uddin, senior markets strategist at Royal Bank of Scotland Group Plc. in Singapore. “Further, in 1999 when the euro was introduced, it still took reserve managers four years before they started diversifying into the single currency. So, we shouldn’t expect strong inflows into the yuan in the near term from risk-averse reserve managers.”

Euro hardest hit 

With the Euro getting the most impact from the Yuan SDR inclusion, it is unlikely that central banks will decrease euro reserves dramatically near-term but the changes to the SDR and, perhaps, the prevalence of negative rates at the short-end of the euro rate curve more especially, suggests the euro may be less favored among reserve-asset managers, Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia opines.

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US retail sales to show economic strength

Screen Shot 2015-08-13 at 7.06.35 AM, US retail sales

13 August, AtoZForex.com, Lagos – The People’s Bank of China again fixed the Yuan against the US dollar at 6.4010. Judging from the sudden action, apparently China had had enough as the country devalued its currency allowing it to slide for three days. The People’s Bank of China stepped in to support the Yuan in the final minutes of trading Wednesday as the Yuan dropped 2 percent against the U.S. dollar, as reported by Dow Jones.

The Yuan weakened 0.22% more than yesterday’s USD/CNY closing level of 6.387 and 1.11% weaker than Wednesday’s fixing of 6.3306, marking its weakest fixing level since October 2012.

China’s currency has weakened for the third straight day since the People’s Bank of China devalued the yuan on Tuesday. The bank devalued the yuan by nearly 2 percent, the largest one day drop for the currency ever. The country seems to be propelling towards a more market-based regime by decoupling the Yuan from the dollar. In a bid to establish the Yuan as a reserve currency, the government will have to relax control on the Yuan and allow market forces to play a larger role in determining its value as clarified by financial institutions like the International Monetary Fund.

UK wage report

Yesterday, we had the average earnings index 3m/y and the claimant count change from the UK. The report from the office of National statistics showed that There were 31.03 million people in work, 63,000 fewer than for January to March 2015 but 354,000 more than for a year earlier. The employment rate (the proportion of people aged from 16 to 64 who were in work) was 73.4%, little changed compared with January to March 2015 but higher than for a year earlier (72.8%). There were 1.85 million unemployed people (people not in work but seeking and available to work), 25,000 more than for January to March 2015 but 221,000 fewer than for a year earlier.

The unemployment rate was 5.6%, little changed compared with January to March 2015 but lower than for a year earlier (6.3%). The unemployment rate is the proportion of the labor force (those in work plus those unemployed) who were unemployed. Comparing April to June 2015 with a year earlier, pay for employees in Great Britain increased by 2.4% including bonuses and by 2.8% excluding bonuses. The data suggests that the recovery of the labor market may prove uneven.

It also reflects that the degree of slack in the labor market may be greater than expected, therefore may mean that the Bank of England has ample time to properly consider the impending interest rate hikes. The initial reaction from the pound was a 50 pip plunge against the USD after the release. But recovered through the day to end higher.

On the calendar today:

It’s a retail sales day as the US and New Zealand are both set to release their retail sales data.

10:45 PM GMT:

NZD retail sales q/q is also due.

12:30 PM GMT:

Core Retail Sales m/m and retail sales- Retail sales have been fluctuating, with a drop in June following a big pickup in May. Since consumer spending reflects more than two-thirds of economic output, the July figure of the US retail sales will reflect the economy’s strength as we enter the third quarter of the year. Economists surveyed by MarketWatch expect data to show retail sales rising a healthy 0.7% in July after a dismal 0.3% drop in June. However, sales excluding automobiles are expected to be up a healthy 0.5%, up from a 0.1% gain in June.

Stabilising China economy triggers Fed rate hike

14 December, AtoZForex.com, Lagos – The risk of a hard landing for China has been subdued to a reasonable extent as recent data shows the world’s second largest economy is gradually stabilizing. This alleviates another concern of the Fed, making it more likely that the US Central will raise rates this week, having shied away from a rate hike back in September on a growing global economic weakness, mainly from China. The unanticipated pickup in China’s old growth drivers and renewed vigor in new ones helps clear the way for the first U.S. interest-rate rise since 2006.

A strengthening and stabilising China economy can be seen from the various indexes that have displayed a pick up. One of which is the Bloomberg monthly China gross domestic product tracker, which improved to 6.85 percent estimated growth pace for November. This marks the strongest reading since June, thanks to positive industrial production, retail sales and fixed-asset investment which all came above forecast.

PBOC monetary policy actions

The People’s Bank of China has cut rate six times since last year, down to record low levels, also boosting fiscal spending, adding to a huge pile of economic debt which threatens the long term outlook of the country. However, policy makers have added stimulus recently to help inspire medium to high-speed growth while shifting to a more balanced, services and consumption-led economy and away from manufacturing and infrastructure spending.

“China’s real economy is stabilizing tentatively at low levels,” Wang Tao, chief China economist at UBS Group AG in Hong Kong, wrote in a note to clients after the data release. “The intensification of growth support already delivered and to come (both infrastructure and non-infrastructure related) should underpin near-term economic growth momentum.”

Yuan Dollar linkage

The PBOC is now also planning to reduce the Yuan’s link to the dollar as the currency fell further on Friday, on dollar strengthening. The PBOC’s China Foreign Exchange Trade System unit spurred speculation that policy makers want to reduce the currency’s link to the dollar and let it weaken further. The new Yuan index is expected to comprise of 13 currencies to “help bring about a shift in how the public and the market observe RMB exchange rate movements,” according to the CFETS statement of Friday. The move of a loosened link of the yuan to the dollar is expected to help support trade for China’s export-dependent economy.

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