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Macro Comment China

Macro Comment China — Stimuli not enough to avoid further slowdown

Economic growth in China is slowing due to trade war fears and previous deleveraging efforts. Stimuli have been announced and more are likely to come. These measures will mitigate but not avoid the growth slow-down, as it is now more difficult than it was previously to stimulate the economy.

Bjarke Roed-Frederiksen, Senior Economist |

Macro Comment China — No more CNY weakening expected

Following a marked CNY weakening over the summer, we do not expect much more weakening before re-newed strengthening sets in. Currency depreciation is not China's preferred weapon in the trade war, and we see signals that the authorities, if anything, are working for a stronger rather than weaker CNY. 

Bjarke Roed-Frederiksen, Senior Economist |

Macro Comment China — How will looser capital restrictions impact the CNY?

Capital restrictions are once again being loosened in China, with domestic stock and bond markets being opened up for foreigners. This is part of China's strategy to integrate its financial markets with the rest of the world, and ultimately to make the CNY a new global reserve currency. Opening up does not necessarily imply net capital inflows and give a stronger currency; we continue to expect a slightly weaker CNY versus the USD in the short run amid general USD strength.

Bjarke Roed-Frederiksen, Senior Economist |

Macro Comment China — Trade tensions on everyone’s lips

Our recent investor trip did not make us any more worried about an escalation of the trade war between China and the US. China will likely not devalue its currency or dump US treasuries, and China's economy is doing quite OK, even as credit and, in particular, shadow banking are being curbed. The recent opening up of China's bond market for foreigners looks like an attractive investment opportunity, in our view.

Bjarke Roed-Frederiksen, Senior Economist |

Macro Comment China — Does the more powerful Xi dare lower the growth target?

China's national legislature, the National People's Congress, will convene in early March to elect new state leaders and decide on new economic targets and reform areas. There is little doubt that Xi Jinping will re-main in charge for another five-year term and also most likely beyond that. We foresee an unchanged growth target, but expect the rhetoric surrounding the target to pave the way for gradually slowing growth ahead. The Congress will also shed further light on the coming years' policy priorities, which include fighting overcapacity, pollution, and financial risks.

Bjarke Roed-Frederiksen, Senior Economist |

Macro Comment China — CNY should weaken soon as USD gains strength again

As the USD regains strength generally, we expect the CNY to weaken versus the USD, as we stick to our forecast of a stable effective Chinese exchange rate. From late 2018, we expect a stronger CNY, amid re-newed USD weakness.

Bjarke Roed-Frederiksen, Senior Economist |