Whatâs Going On Here?Data out on Wednesday showed a drop-off in the growth of Chinese exports. What Does This Mean?Canny investors know that shrinking export growth is a canary in the coal mine for the health of the Chinese economy, and new data suggests that canaryâs looking a little worse for wear. Falling global demand and seemingly endless Covid restrictions have hit Chinese exports hard: Augustâs 7% uptick from the same time last year is a far cry from the 13% that was expected. Whatâs worse, economists now think single-digit growth mightn't be an exception going forward: in fact, it could easily become the new rule. And with last monthâs import growth stunted at a measly 0.3%, China will be hard pushed to plug the gap with domestic demand. Why Should I Care?For markets: The yuanâs looking iffy.
Weaker exports mean less money flowing into China, weakening its domestic currency as a result. Add an especially sturdy US dollar to the mix, and suddenly the prospect of the yuan crossing the 7-per-dollar mark looks increasingly likely. But the Chinese government â busy preparing for its twice-a-decade party reshuffle next month â is doing its darndest to stop a disorderly plunge in the currency from upsetting stocks and hitting the wider financial system. Thatâs probably why the central bank has been taking steps to stymie the currencyâs depreciation, which include this weekâs decision to let banks hold less foreign currency in reserve.
The bigger picture: Chinaâs still in the ascendant.
China has its fair share of issues, sure, but analysts at Oxford Economics still believe its economy will grow an average of roughly 4.5% this decade, and stay steady at 3% the decade after. And while that does mean China would miss its grandiose target of doubling its economy between 2020 and 2035, the numbers still show China outstripping the US to take the throne as the worldâs biggest economy by 2033. | 