The Chinese yuan is making significant gains against its major currency rivals towards the end of the trading week. The yuan is rising on the latest services economic data, but the currencyâs rally was capped by concerning manufacturing news.
In China, the Purchasing Managersâ Index (PMI) has become an important economic indicator. It is monitored closely by the market because it is a survey of businesses in a particular industry. Any reading above 50 signals expansion, while anything below 50 suggests contraction.
On Thursday, the National Bureau of Statistics reported that the services PMI clocked in at 54.7, beating the 53.8 in the previous month. This is important because the service sector represents half of the Chinese economy, and it offsets any declines in the manufacturing industry.
The manufacturing PMI was 49.5 last month, up from 49.4 in December. The last time the nationâs manufacturing PMI dipped into contraction territory was in July 2016. It is yet another sign that the Chinese economy is slowing down as the trade dispute between the worldâs two largest economies lingers in the background.
These were the first major economic announcements in 2019, leading analysts to conclude that Beijing is âlosing momentumâ and that this could be what is in store for China for the rest of the year.
Li Chao, an analyst with brokerage house Huatai Securities, wrote in a research note:
That means the downward pressure on the Chinese economy is still significant. Companies are continuing to cut their stock proactively, a move that might not change until the fourth quarter of 2019, meaning weaker support for the gross domestic product.
Meanwhile, Chinese net acquisitions of US commercial real estate in 2018 decreased to their lowest levels since 2012. In total, conglomerates, insurers, and other Chinese investors were net sellers of $854 million, a six-year low. The cause? Beijing applying pressure on Chinese investors to return their cash home, especially at times when the economy is sluggish.
The USD/CNY currency pair tumbled 0.24% to 6.7004, from an opening of 6.7165, at 16:41 GMT on Thursday. The EUR/CNY plunged 0.54% to 7.6689, from an opening of 7.7109.
If you have any questions, comments or opinions regarding the Chinese Yuan,
feel free to post them using the commentary form below.
