Chinese Yuan Jumps on Data, Capped by Currency Manipulation Claims

The Chinese yuan is strengthening midweek on signs of an economic recovery, even though a government-sponsored enterprise (GSE) recently defaulted on its debt, sparking concerns about the world’s second-largest economy. But the yuan’s gains were capped on accusations that Beijing was manipulating its currency.

Bloomberg Economics released some interesting measurements regarding the state of China’s once roaring economy. The gauges suggest that there are plenty of signs that China is recovering as all the key aspects show that Beijing may have bottomed out. This would be welcomed news for a country that had been expanding at an enormous rate since the late-1990s.
According to the business news network, major onshore stocks, key property stocks, iron and copper prices, small business confidence, and South Korean exports. The only forms of activity that have been stagnant have been sales manager sentiment and factory inflation.
Investors will look to Thursday when the first official economic data is released for February: the purchasing managers’ indexes (PMI) for manufacturing and non-manufacturing. Right now, analysts anticipate a decline.
But it is not all sunshine and lollipops for China.
Last week, Qinghai Provincial Investment Group, the largest aluminum producer in the province of Qinghai, did not make an $11 million interest payment on a foreign $300 million bond. The state-owned enterprise also missed a principal and interest payment on a $3 million Chinese bond.
This is the first time that a state-owned business failed to make a debt payment since 1998, suggesting that the nation’s slowing economy is impacting default rates and debts are placing a strain on provincial governments.
Speaking on Capitol Hill on Wednesday, US Trade Representative Robert Lighthizer told lawmakers that he thinks China is likely manipulating its currency, and not to weaken it but to strengthen it. He also told the House Ways & Means committee that there yet to be an agreement “on anything until there is an agreement on everything.” He does believe, however, that there might be a positive development on currency issues.
The Bank of Japan (BOJ) also commented on China as Governor Haruhiko Kuroda told the Japanese parliament that he anticipates China’s economic growth will pick up in the second half of 2019.

China’s economy slowed quite significantly in the latter half of last year. The economy may remain in the doldrums in the first half of this year but will likely pick up thereafter, as authorities have taken fiscal and monetary stimulative action.

The USD/CNY currency pair tumbled 0.19% to 6.6872, from an opening of 6.7002, at 17:42 GMT on Wednesday. The EUR/CNY fell 0.37% to 7.6064, from an opening of 7.6345.

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