Chinese Yuan Strengthens As Q4 GDP Beats Estimates

The Chinese yuan is strengthening against most major currency rivals to close out the trading week, driven by a better-than-expected reading of the world’s second-largest economy in the fourth quarter. But the various economic reports on Friday highlighted across-the-board improvements, which could signal that Beijing may be on track for a rebound in 2020, especially with the US and China declaring a trade truce.

According to the National Bureau of Statistics, the Chinese economy expanded at a 27-year-low of 6% year-on-year in the fourth quarter and the full 2019 economy advanced at a 29-year low of 6.1%. This was unchanged from the third quarter and continued to be the weakest growth rate since the first quarter of 1992. The key thing was that the GDP was higher than the market forecast of 5.9%.
Industrial production climbed 6.9% YoY last month, up from the 6.2% increase in November. This is the best figure since March 2019 and analysts had penciled in a gain of 5.9%. Most of the growth was situated in chemicals, minerals, metals, power equipment, textiles, and machinery. Transport equipment led the losses.
China’s industrial capacity utilization rate edged up to a two-year high of 77.5% in the October-to-December period, up from 76.4% in the July-to-September period. Experts had called for a rate of 76.2%.
Retail sales were unchanged at 8% in December, but the median estimate was 7.8%. Most industries reported sales growth, including cosmetics, personal care, furniture, telecommunications, and home appliances. Automobiles also reported a slight gain last month.
Last year, fixed-asset investment rose 5.4% to $8.04 trillion. Analysts had projected a 5.2% increase. Private investment jumped 4.7%, while public investment surged 6.8%. The investments were concentrated in high-tech, manufacturing, and service sectors. Agriculture received a slight bump.
All of this is good news for an economy that is attempting to rebound in 2020 now that Beijing and Washington have signed the first phase of a trade agreement. In addition to federal stimulus and accommodating by the People’s Bank of China (PBoC), the preliminary trade pact may create some level of certainty until the trade dispute is completely over.
The USD/CNY currency pair tumbled 0.28% to 6.8597, from an opening of 6.8788, at 17:06 GMT on Friday. The EUR/CNY plummeted 0.68% to 7.6084, from an opening of 7.6606.

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