China’s roaring economy has sparked a yuan rally, but it may not last
China’s third-quarter GDP data provided comfort for investors that its “first in, first out” economy is continuing to lead the global recovery from the coronavirus-induced slump.
Not only did the economy retain a decent amount of momentum from the second quarter’s V-shaped rebound, high-frequency data showed that the recovery had also gained more breath and balance.
Sectors which led the recovery – such as industrial production, investment and exports – saw growth largely returning to pre-Covid-19 levels, while the laggards – consumption, service sector activities, and labour market conditions – were catching up with the front runners.
The overall impression is that the economy is now firing on all cylinders, and on track to deliver growth for the year while the rest of the world is still mired in recession.
Demand for the yuan has spiked on the back of global appetite for China’s goods and renminbi bonds, thanks to its revitalised industrial sector and prudent monetary policy.
But in the medium to long term, yuan strength against the dollar will also depend on US macro policies. The outcome of the US election is key.
—-by Aidan Yao in SCMP, Nov 4, 2020
https://www.scmp.com/comment/opinion/article/3108196/chinas-roaring-economy-has-sparked-yuan-rally-it-may-not-last
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