China, has for some time now been the world’s second largest economy, behind the US, and the economic data is well watched. The so called ‘factory of the World’ is a core part of the global economy and as a big exporter, a good indicator of global consumption.
The world then, is watching how the economy of China will recover after the worst period of the Covid 19 pandemic wondering what might be in store for their own economies.
Three Decades of Record Growth
The past 30 years in China have heralded an age of astonishing growth, with average annualised GDP growth of more than 9%, but it will come as no surprise that this year will be different.
During Q1 and Q2 of 2020, when the world was largely locked down, China returned economic data not seen in the Asian powerhouse for many a year. With Q1 GDP returns contracting by 6,8%, followed by a mini rebound of 3.2%, Q3 was expected to deliver a stronger return. European consumers by and large were enjoying summer, with many fewer restrictions than earlier in the year.
Q3 Bounce But A Miss From Forecasts
It should come as no surprise that in the past 3 months, China has seen a strong growth of 4.9% in comparison to the same period in 2019. Despite this rebound, it does however reflect a ‘miss’ from market expectations which were forecasting 5.3%.
China’s GDP (gross domestic product) at the start of the year suffered a massive hit with the closure of factories and manufacturing plants, but now their recovery has accelerated, they are leading the GDP recovery worldwide.
The data reported by China has come under scrutiny and the accuracy of the economic data has been put under the spotlight as usual.
Economic Data Driven By Exports But China Shows Rounded Strength
Exports were the main driver of the results, hitting 9.9% growth in September vs 2019 figures. The growth in GDP was also supported by infrastructure and real estate investment. Industrial output gathered momentum MOM from April through to September, going from 3.9% to 6.9% over the past 6 months.
The economy of China is clearly one that still has great potential for further growth in the coming periods ahead. According to IMF predictions, the only global economy expected to grow during 2020 is in fact China.
With an expected growth of 1.9% even during one of the darkest years in memory for most economies around the world, it seems as though there is really nothing that can stop China from reaching new highs.
Yuan holding strength
The Chinese Yuan (RMB) over recent months has continued to strengthen against the USD, as the differences in economic pictures become clearer. There is also the continued US election uncertainty that is presenting presenting questions around the US currency.
Despite the economic differences with other regions, other major currencies are faring slightly better YTD, although that trend is now very much back in reverse.
EUR has struggled against RMB over the past month and there may be an opportunity opening up on the charts.