Posts tagged ‘Foreign exchange market’

15/02/2016

Home on the Range, Chinese Style – China Real Time Report – WSJ

It’s a small step in the right direction, driven more by necessity than enlightened policy.

That’s the view from economists on China’s move this year to put forward a range for its economic growth target rather than a single number. The head of the National Development and Reform Commission, China’s top economic planning agency, said early this month that the 2016 target is likely to be “6.5% to 7%,” the first time in recent memory that China has used such a band. The target is set to be officially released early next month when China’s parliament convenes.

For decades, Beijing beat its annual growth targets without breaking a sweat. More recently, as growth decelerated faster than expected, it has faced growing difficulty hitting its number, so a range provides more wiggle room.

This follows Beijing’s decision to add an “about” to both its 7.5% target in 2014 and its 7% target last year. The adjective proved handy when the actual growth figures wound up falling short both times.

The risk this year, economists say, is that even a 6.5% to 7% target may be too high, heaping pressure on local officials to artificially stimulate growth in ways that increase debt and blunt reform initiatives.

This is also the year that China sets a growth target for the coming five years that’s expected to be 6.5%, in line with a Communist Party goal of doubling per capita income by 2020 over 2010 levels. This benchmark also may be high, analysts said, given China’s many structural problems and so-far limited appetite for reform.

“If they really stick to the 6.5% target by adopting unsustainable policies, throwing up more credit, they face a bigger problem with debt down the road,” said Fitch Ratings Inc. analyst Andrew Colquhoun. “Many emerging market problems in the past have happened when countries veer off and start to believe their own hype on what growth is possible.”

Source: Home on the Range, Chinese Style – China Real Time Report – WSJ

Advertisements
14/01/2016

Economists React: China’s December Trade Data May Mean Worst Is Over – China Real Time Report – WSJ

Better-than-expected export and import data in December suggest the beginning of a modest improvement in trade despite recent turmoil in Chinese financial markets, economists say, even as a weaker yuan helps exporters.

China’s exports in December were off 1.4% from a year earlier, a smaller decline than November’s 6.8% or the median 8% forecast of 15 economists surveyed by the Wall Street Journal. Imports were down 7.6%, compared with November’s 8.7% and the 11% median forecast.

Following are excerpts from economists’ views on Wednesday’s trade data, edited for style and length:

The idea that China needs to devalue its currency to reflect a weakening export sector is not borne out by the 2015 trade figures, which show that China gained world-wide market share in a tough global trading environment. The past couple of months, we’ve seen exports surprise on the upside. Worries that something is going on in China behind the scenes, that real compelling economic fundamentals are pushing the yuan weaker, is inconsistent with what we’re seeing on the trade front.—Tim Condon, ING Group ING +0.96%

China’s December trade data was reassuring—indicating that, despite the turmoil on the stock and foreign-exchange markets, growth dynamics in the real economy are evolving more gradually and may actually be improving somewhat. The improvement in exports suggests that the global goods trade gained some momentum toward the end of 2015, with China helped by a weaker yuan. Headline December goods import data were down 7.6%, but import volumes have started to improve. We estimate import volumes were up 7.5% year on year in December, mainly due to better “normal imports” used in China’s own economy (rather than re-exported), implying a pickup in domestic demand momentum at the end of 2015.—Louis Kuijs, Oxford Economics

Better-than-expected trade data hint that the yuan depreciation in December—the currency fell 1.5% against the dollar—could have boosted external demand. For the year, China’s exports dropped by 2.8% and imports plunged by 14.1%. The underperformance of imports reflects sluggish demand for commodities as China moves toward a more consumption-driven growth model. It also highlights the deleveraging under way in China’s manufacturing sector because of the property slowdown. The mixed picture illustrated by China’s trade figures convinced us that growth will be under pressure. Also, China could steer further yuan depreciation at an appropriate pace and time to support economic growth and facilitate the deleveraging in many sectors plagued by overcapacity.—Zhou Hao, Commerzbank AG

China’s better-than-forecast trade figures may signal the beginning of a modest improvement as the yuan stabilizes against a weighted basket of currencies. That could translate into export growth of 5% to 7% and import growth of 1% to 2% this year. Demand may not be a big driver, but China is becoming more competitive with its exchange rate.—Ding Shuang, Standard Chartered STAN.LN +0.35%

China’s better-than-expected export data in December was mainly due to the world’s recovering appetite for exports from China, but its sustainability is still an open question. The devaluation of the yuan might have played a role in boosting exports, though it wasn’t the main driver. To what extent the yuan will influence exports this year is uncertain, given the central bank’s intervention in the foreign-exchange market. But January export figure should be relatively positive since 2015 provided a weak base for comparison.—Ma Xiaoping, HSBC HSBA.LN +0.49%

Source: Economists React: China’s December Trade Data May Mean Worst Is Over – China Real Time Report – WSJ

Law of Unintended Consequences

continuously updated blog about China & India

ChiaHou's Book Reviews

continuously updated blog about China & India

What's wrong with the world; and its economy

continuously updated blog about China & India