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Chinese Yuan Mixed As Industrial Profits Rebound

December 27, 2019 at 17:49 by Andrew Moran

A fan of 50-yuan billsThe Chinese yuan is mixed at the end of the trading week as final data of 2019 and outlook for 2020 drive the currency’s trading performance. With industrial profits rebounding in November, analysts are holding out hope that next year could be an improvement now that there is some certainty on the trade file.

According to the National Bureau of Statistics (NBS), the largest industrial companies saw their profits tumble by 2.1% in the first 11 months of 2019, up from a 2.9% drop in the previous month. The market had penciled in a 3.2% contraction. In November only, industrial profits surged 5.4%, up from the 9.9% slide in October.

The report revealed that profits at private-owned firms climbed 6.5%, while state-owned industrial organizations declined by 11.2%. Also, 13 of the 41 industries that were surveyed reported falling profits. Telecommunications and electronic equipment manufacturers led the way, but chemicals, automobiles, paper, and textiles could not enjoy similar gains.

This comes one week after it was reported that industrial output also beat market projections last month.

Analysts believe that industrial profits will stabilize next year because trade uncertainty has greatly diminished due to the US and China poised to ratify phase one of a comprehensive agreement.

Liu Shangxi, head of the Chinese Academy of Fiscal Sciences, a think-tank under the Ministry of Finance, told South China Morning Post:

If the phase one deal is inked, private investors will be more confident and investment will bottom out. Next year will be no worse than this year, and GDP growth could be around 6 per cent or a little bit higher.

Of course, this does not mean that the Chinese economy can return to its previous growth levels because there is still a lot of weakness throughout the marketplace. This view was supported by a recent Chinese Beige Book report that highlighted plenty of challenges throughout Beijing, including high corporate borrowing, low cash flow, and the prevalence of shadow financing in the fourth quarter.

The USD/CNY currency pair dipped 0.02% to 6.9958, from an opening of 6.9973, at 16:31 GMT on Friday. The EUR/CNY advanced 0.69% to 7.8231, from an opening of 7.7695.

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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