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Chinese Yuan Mixed on Weaker Industrial Output, Surging Home Prices

August 15, 2019 at 18:55 by Andrew Moran

Yuan note reverseThe Chinese yuan is having a mixed trading session against multiple currencies, driven by varied economic data. The biggest story for China was its July industrial production being worse than what the market had expected, though it was somewhat offset by soaring housing prices in the world’s second-largest economy. The yuan may not be able to strengthen against a basket of currencies until the trade war is finally over.

According to the National Bureau of Statistics (NBS), industrial output in July rose just 4.8%, down from the 6.3% gain in June. This is far less than the market forecast of 5.8% and is the worst growth since 2002. Production has not dipped below the 5% mark since the beginning of 2013.

Retail sales also disappointed financial markets as they advanced just 7.6% last month, down from the 9.8% surge in the previous month. Investors had anticipated a gain of 8.6%. The last time receipts were under 8% was in 2003, but retail sales have already fallen under that threshold twice this year.

But it was not all bad news on the data front for Beijing. Average prices of new homes in 70 cities soared by 9.7% year-on-year in July, down from just 10.3% in June. But this is the first time in 2019 that price increases were under 10%.

Ultimately, the statistics agency believes that China’s economy performed at a “reasonable range” last month:

In July, in the face of mounting risks and challenges both at home and abroad, under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, all regions and departments implemented the decisions and arrangements made by the Central Committee of the Communist Party of China and the State Council, stuck to the general working guideline of making progress while maintaining stability, adhered to the new development philosophy, continued to focus on the supply-side structural reform, and insisted on promoting high-quality development of the economy. As a result, the overall economy continued to perform within the reasonable range and sustained generally stable growth while making further progress.

Next on the schedule is year-to-date industrial profits; traders expect a decline of 2.4%.

The US-China trade spat lingers on, though the US Trade Representative (USTR) office has made some concessions. Earlier this week, the federal government delayed the new 10% tariffs on the remaining $300 billion in goods until December, from the previously announced September 1. It is unclear if Beijing will make its own concessions. Soon after the new tariffs were announced, China confirmed it would halt purchases of American agriculture, including soybeans.

The USD/CNY currency pair rose 0.14% to 7.0340, from an opening of 7.0244, at 18:43 GMT on Thursday. The EUR/CNY slid 0.14% to 7.8116, from an opening of 7.8227.

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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