beijingwalker
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China: A bright spot in the global economy
ANALYSIS | Published Oct 06, 2020 06:26 (+00:00)
Growth. While both the US and Europe are struggling to find their feet after the COVID-19 shock, China is seeing a solid rebound in its economy with the coronavirus almost absent domestically. PMI has stayed robust and copper prices are still hovering at high levels, signalling decent demand. Money growth, the credit impulse and electricity generation point to similar development.
Home sales are also growing above trend. Retail sales are recovering more slowly while car sales are surging. External demand is also strengthening as our export model based on G3 PMI and effective CNY is pointing to decent upside for Chinese exports.
Inflation. Headline CPI increased slightly to 2.7% in July (possibly due to higher energy prices) but excluding food prices CPI fell further to 0.0%, in July providing ample space to ease monetary policy if needed. PPI shows signs of recovering, which is helping industrial profits.
Monetary policy. The Loan Prime Rate (LPR) has been reduced to 3.85% but has been unchanged for months now, signalling an easing pause on the rates side. The central bank is providing liquidity through short- and medium-term funding facilities. Overall, there are some signs that the central bank has taken the foot off the speeder amid the solid economic rebound as the growth in the total social financing is abating.
CNY: USD/CNY has fallen in line with our expectations as the interest rate differential has increased and the USD has weakened more broadly. We see a bit more downside for the cross as the global recovery continues and the Chinese economy performs relatively strongly. As a result we see the USD/CNY trajectory as follows; 6.75 in 1M and 6.70 in 3-6 and further down to 6.60 on 12M.
Download The Full China Macro Monitor
www.fxstreet.com
ANALYSIS | Published Oct 06, 2020 06:26 (+00:00)
Growth. While both the US and Europe are struggling to find their feet after the COVID-19 shock, China is seeing a solid rebound in its economy with the coronavirus almost absent domestically. PMI has stayed robust and copper prices are still hovering at high levels, signalling decent demand. Money growth, the credit impulse and electricity generation point to similar development.
Home sales are also growing above trend. Retail sales are recovering more slowly while car sales are surging. External demand is also strengthening as our export model based on G3 PMI and effective CNY is pointing to decent upside for Chinese exports.
Inflation. Headline CPI increased slightly to 2.7% in July (possibly due to higher energy prices) but excluding food prices CPI fell further to 0.0%, in July providing ample space to ease monetary policy if needed. PPI shows signs of recovering, which is helping industrial profits.
Monetary policy. The Loan Prime Rate (LPR) has been reduced to 3.85% but has been unchanged for months now, signalling an easing pause on the rates side. The central bank is providing liquidity through short- and medium-term funding facilities. Overall, there are some signs that the central bank has taken the foot off the speeder amid the solid economic rebound as the growth in the total social financing is abating.
CNY: USD/CNY has fallen in line with our expectations as the interest rate differential has increased and the USD has weakened more broadly. We see a bit more downside for the cross as the global recovery continues and the Chinese economy performs relatively strongly. As a result we see the USD/CNY trajectory as follows; 6.75 in 1M and 6.70 in 3-6 and further down to 6.60 on 12M.
Download The Full China Macro Monitor
China: A bright spot in the global economy
Growth. While both the US and Europe are struggling to find their feet after the COVID-19 shock, China is seeing a solid rebound in its economy with t
