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Chinese Yuan Weakens on Disappointing Economic Data

December 14, 2018 at 16:10 by Andrew Moran

Chinese 100-yuan notesThe Chinese yuan is weakening at the end of the trading week on recent National Bureau of Statistics (NBS) data that disappointed investors. This year, the currency’s descent has been in line with the trends plaguing the national economy, leaving many analysts wondering if the yuan will maintain this negative performance in 2019.

According to China’s statistics bureau, November retail sales rose 8.1%, down from 8.6% in October and below the market forecast of 8.8%. This is the weakest pace in 15 years.

Last month, value-added industrial output advanced 5.4% from the same time a year ago, which is below the initial estimate of 5.9%. This represents the slowest pace of growth since 2015.

Between January and November, fixed asset investment (FAI) climbed 5.9%, higher than economists’ predictions of 5.8%.

Construction activity growth recorded a 5.8% boost, also beating median estimates of 5.7%.

On the labor front, the unemployment rate in the nation’s largest cities fell 0.1% in November to 4.8%.

Experts do agree that, even though the numbers have been lower than predicted, they are still surprisingly good. This is especially true with a trade war between the world’s two largest economies lingering in the background.

Earlier this month, President Donald Trump and Chinese President Xi Jinping agreed to a 90-day trade truce. The short-term agreement consists of Washington suspending its planned 15% increase to tariffs on $200 billion worth of Chinese goods and Beijing purchasing more agriculture and slashing automobile import levies. Should both sides fail to reach a new trade deal, then the tariffs would go into effect.

The federal government does anticipate to implement a series of stimulus measures to spur growth, including tax cuts, fiscal stimulus, and opening domestic markets to foreign investors. This would be in addition to the current wave of stimulus efforts Beijing is employing.

The USD/CNY currency pair surged 0.38% to 6.9076, from an opening of 6.8817, at 14:53 GMT on Friday. The EUR/CNY tumbled 0.27% to 7.7997, from an opening of 7.8207.

If you have any questions, comments, or opinions regarding the Chinese Yuan, feel free to post them using the commentary form below.

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