Chinese Yuan Slides As Q4 GDP Falls Short of Estimates

The Chinese yuan weakened against its US currency rival to start the trading week as economic growth fell below market expectations. Despite the gross domestic product (GDP) falling short of fourth-quarter estimates, the world’s second-largest economy expanded by more than 2% in 2020 as the rest of the world suffered significant damage amid the coronavirus pandemic. But it was not enough to lift the yuan.

According to the National Bureau of Statistics (NBS), the economy expanded 2.6% during the October-to-December period, down from 3% in the previous quarter. Economists had penciled in growth of 3.2%. This was the weakest quarterly GDP reading since the economy crashed in the first quarter.
Overall, China’s GDP increased 2.3% in 2020, beating market expectations of 2%. It became the only Group of 20 (G20) country to post annual growth last year. Officials attributed the better-than-expected gain to consumption, which accounted for more than half of the GDP gain.
The impact of COVID-19 lingers, and many parts of China are now witnessing a resurgence of coronavirus cases, forcing the central government to impose new lockdowns on nearly 30 million people.
NBS officials revised China’s economic growth rate in 2019 to 6%, down from the previously reported 6.1%. The statistics agency blamed US tariffs on manufacturing the downward adjustment.
In other data, retail sales rose 4.6% year-over-year in December, down from 5% in November. The median estimate was 5.5%. Industrial production advanced at an annualized rate of 7.3%, up from 7% in the previous month. Market observers penciled in a boost of 6.9%. Industrial capacity utilization edged up to 78% in the three months ending December, up from 76.7% in the previous quarter. The unemployment rate was unchanged at 5.2%.
According to the People’s Bank of China (PBoC), year-to-date fixed asset investment picked up 2.9% year-over-year in December, below the consensus of 3.2%.
This comes as the NBS reported that total exports surged 3.6% for the year, buoyed by shipments of medical supplies, face masks, and technology.
Last week, the central bank revealed that it would tighten monetary policy in 2021 due to the strong-than-expected economic performance. But other PBoC officials noted that the central bank would employ monetary tools that are “more flexible, targeted, and appropriate.” Sun Guofeng, the head of the PBoC’s monetary policy department, recently stated that interest rates are at a good place, adding that the institution might lower reserve requirement ratios (RRR) to facilitate ample growth.
The USD/CNY currency pair rose 0.19% to 6.4930, from an opening of 6.4808, at 11:55 GMT on Monday. The EUR/CNY picked up 0.06% to 7.8315, from an opening of 7.8291.
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Original from: www.earnforex.com