Chinese Yuan Weakens to 10-Year Low As Economy Holds Steady

The  Chinese yuan weakened to  a  10-year low against its US counterpart as  the  national economy held steady in  October. It is evident that President Donald Trump’s trade war against Beijing continues to  have a  dire toll on  the  world’s second-largest economy. With the  trade spat expected to  linger into 2019, analysts are warning that the  worst is far from over for  China.

According to  new economic data from UBS Evidence Lab, property sales growth was flat, property investment growth was up, industrial production rebounded, retail sales improved from September, and  manufacturers’ auto sales were soft. Meanwhile, exports grew 15%, while imports jumped by  21%.
With more analysts becoming bearish on  the  yuan, as  well as  the  currency’s proxies, there are some experts who contend that the  People’s Bank of  China (PBOC) might intervene at  anytime. Officials have already confirmed that they will not use the  yuan as  a  bargaining chip in  the  trade war. However, last week, PBOC heads hinted tougher management of  the  currency by  eliminating a  phrase from an  important monetary policy report that relates to  market forces. This is the  first time it has happened in  five years.
The  longer the  trade war continues, the  worse it will be for  global supply chains and  Chinese demand for  products from neighboring markets, says Oxford Economics.
Louis Kuijs, head of  Asia Economics at  Oxford Economics, said in  a  report:

For  most Asian economies, exports to  meet Chinese domestic demand have risen much more rapidly than indirect exports via supply chains, with the  former now exceeding the  latter.

The  significant amount of  Asian exports used in  China’s own economy means that in  assessing the  impact of  a  US-China trade war, we should expect the  effect via China’s domestic demand to  play a  key role.

Other analysts are not optimistic about Beijing’s stimulus efforts. Citi wrote that the  strengthening US dollar, pressures on  global trade, and  a  tumbling Chinese economy pose risks to  emerging markets.
The  USD/CNY currency pair rose 0.1% to  6.9637, from an  opening of  6.9569, at 18:07 GMT on Monday. The  EUR/CNY cratered 0.74% to  7.8282, from an  opening of  7.8867.

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