Asia's largest economy: China

Updated: Dec 23, 2019


2016 was a tumultuous year for the world's second largest economy's stock market. Lack of direction in terms of the policy was attributed as one of the key reasons for the turmoil in Chinese markets. Since then though the Central Bank of China ("PBOC") has taken multitude of steps in curbing economic concerns and thereby balancing stock markets. Chinese currency, Yuan, was included in International Monitory Fund's basket of currencies starting October 1st 2016. Meanwhile, on a daily basis PBOC has been monitoring its currency and setting its daily rate vs the US Dollar tightly. All these and many more steps haven't been easy to decide and implement for an economy of a scale as large as China, with a strong cross-border international impact given export - import trade links with nations across. Its not all about China and Bitcoins, is it !! See some charts here for the performance of Chinese index, $USDCNH, Foreign Exchange reserves and the outflows that the nation has seen. (source: Bloomberg)

The efforts seem to be paying off, albeit in a slow and steady manner. With better controlled economic prospects and regulations, Forex reserve is slowly reaching targeted level. Outflows from the country also seem to be descending. As China 's economy recovers and institutional reform improves the business environment, the money that has left will come back: PBOC Governor's belief late last year, seem to be implementing.

Literally, diving from a macro view to a micro view, trade (export and import) data released earlier this morning has widely surpassed expectations. This is just one instance where the controlled newer reforms are bringing about the desired change. As an immediate impact, commodity currencies like Australian Dollar, Canadian Dollar and the New Zealand Dollar have all gained vs the US Dollar, despite Dollar strengthening as a recent trend. Closely watching the macro and the micro environment offers greater investment and trading insights. The nation has been of interest not only to individuals but also to institutions with further deeper tools to monitor and benefit from the trends.

#USDCNH #AUDUSD #CADUSD #NZDUSD

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