Chinese Yuan Dips Despite Bullish IMF, Exports Forecasts

The Chinese yuan is trading lower against some of its currency rivals midweek. The world’s second-largest economy received a bit of renewed confidence this week as many analysts and investors are optimistic that Beijing could have a strong showing both this week and for the rest of 2019. Is China set to host the running of the bulls again?

According to the International Monetary Fund (IMF), China is set to grow 6.3% this year, up from the previous forecast of 6.2%. Its latest World Economic Outlook is not as optimistic for 2020, updating its gross domestic product (GDP) projections from 6.2% to 6.1% next year.
IMF researchers say fiscal and monetary stimulus will offset the losses from the US-China trade war, but there are still many downside risks for the next couple of years.

China has ramped up its fiscal and monetary stimulus to counter the negative effect of trade tariffs. Furthermore, the outlook for US-China trade tensions has improved as the prospects of a trade agreement take shape.

While the overall outlook remains benign, there are many downside risks. There is an uneasy truce on trade policy, as tensions could flare up again and play out in other areas (such as the auto industry) with large disruptions to global supply chains. Growth in China may surprise on the downside.

The IMF is not the only one bullish about China’s economic recovery. Goldman Sachs, Morgan Stanley, and HSBC Holdings raised their forecasts, citing tax cuts, progressing in a US-China trade deal, and improved manufacturing.
A new Reuters poll expects Chinese exports will have rebounded in March, while imports will potentially contract for the fourth consecutive month. A survey of economists anticipates exports will have surged 7.3% last month, compared to the same time a year ago. This would follow a steep 20.8% decline in February. The same study forecasts a 1.3% dip in imports in March.
According to the China Academy of Information and Communications Technology (CAICT), mobile phone shipments to China slipped 6% last month, falling to 28.4 million units. This represents the fourth straight month of double-digit slides.
The USD/CNY currency pair rose 0.06% to 6.7160, from an opening of 6.7118, at 20:18 GMT on Wednesday. The EUR/CNY climbed 0.15% to 7.5713, from an opening of 7.5598.

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