China Is Under Pressure

10/24/2022

1 minute read

2022.10.24 12:08

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After a delay related to the Communist Party congress, China published a batch of monthly and quarterly statistics, which caused mainly disappointing reactions from analysts.

GDP added 3.9% in the third quarter compared to a year earlier
added 3.9% in the third quarter compared to a year earlier against expectations of 3.5%. In the three quarters, the economy added 3.0% over the same period a year ago against 2.5%, the first-rate increase in more than a year.

Also among the positive signals was a jump in by 6.3% y/y in September compared to 4.2% the month before and the expected 4.9%.

A is also higher than expected, but an essential reason for its growth was a fall in imports rather than increased exports, which is not good macroeconomic news.
Cooling retail sales growth from 5.4% to 2.5%
A very alarming signal was the cooling of from 5.4% to 2.5% (3.1% expected). Chinese government officials declare a further commitment to a zero covid expansion policy, potentially preventing economic activity from getting firmly back on the growth track.

An additional worrying factor for Asian markets is the reappointment of Xi Jinping for a third term. Investors are selling off Chinese assets on this news, suggesting a further course of austerity in the country, escalating tensions around Taiwan and anti-market reforms.
USDCNH has surpassed 7.30
Contrary to the famous adage, markets have not been “selling the fact” of Xi’s unprecedented third term, for which they have been preparing in recent months. The has rewritten lows against the dollar since 2008, and the offshore exchange rate has surpassed 7.30. Key Chinese stock indexes are losing about 7% on Monday, pushing the to lows since 2009 and the China H-share to 2005.