The US is officially accusing China
of currency manipulation after the US Treasury announced a sharp fall in the
value of the Chinese yuan against the dollar.
The Chinese yuan drop caught markets
off-guard as Beijing usually supports the currency.
Last week, China pledged to
retaliate after President Donald Trump vowed to impose 10% tariffs on $300 billion
of Chinese imports.
On August 5, the yuan passed the
seven-per-dollar level for the first time since 2008, prompting President Trump
to accuse China on Twitter of manipulating its currency.
tweeted: “Based on the historic currency manipulation by China, it is now even
more obvious to everyone that Americans are not paying for the Tariffs – they
are being paid for compliments of China, and the U.S. is taking in tens of
Billions of Dollars! China has always….
“China dropped the
price of their currency to an almost a historic low. It’s called “currency
manipulation.” Are you listening Federal Reserve? This is a major violation
which will greatly weaken China over time!”
The US Treasury department defines
currency manipulation as when countries deliberately influence the exchange
rate between their currency and the US dollar to gain “unfair competitive
advantage in international trade”.
A weaker yuan makes Chinese exports more competitive, or cheaper to buy with
On August 5, the People’s Bank of China (PBOC) said the slump in the yuan
was driven by “unilateralism and trade protectionism measures and the
imposition of tariff increases on China”.
The US government said Treasury Secretary Steven Mnuchin will now engage
with the IMF “to eliminate the unfair competitive advantage created by
China’s latest actions”.
The move is largely symbolic because the US is already engaged in trade
discussions with China and has implemented tariffs on the country’s imports.
However, it fulfills a presidential campaign promise by President Trump who
pledged to name China a currency manipulator on his first day in office.
The decision rattled investors, with Wall Street’s main stock market indexes recording their worst trading day for 2019. Asia markets extended losses on August 6, with the Shanghai Composite down 1.3% in afternoon trading.
According to the national statistics
bureau, the figures pointed to a “complex environment” both at home
It said the country’s economy had
“performed within the reasonable range” in the first half of 2019 but
that it faced “new downward pressure”.
While China watchers advise caution
with Beijing’s official gross domestic product numbers, the data is seen as a
useful indicator of the country’s growth trajectory.
Other data showed some signs of
improvement in the world’s second largest economy.
Industrial production rose 6.3% in
June from a year earlier, while retail sales rose 9.8% year-on-year – both
above forecasts in Reuters polls.
Slowing growth in China has raised
concerns about the potential knock-on effect on the global economy.
Earlier this year China announced
plans to boost spending and cut billions of dollars in taxes in an effort to
support the economy.
It has also moved to provide a
liquidity boost by reducing the amount of cash banks must hold in reserve.
The US-led trade war is another
factor weighing on growth.
While the US and China agreed to resume trade talks at a recent G20 summit
in Japan, they have already placed tariffs on billions of dollars worth of one
another’s goods, hurting businesses and casting a shadow over the world
The Shanghai Composite, one of China’s leading stock indexes, has seen its highest daily spike in more than two years following signs that the government will step in to support battered equity markets.
It closed up 4.1%, its biggest one-day rise since March 2016.
The moves extend a rally that began on October 19 and after investor confidence surged on assurances from Beijing.
Stocks had been falling as China’s economic growth continued to stutter.
On October 19, top Chinese financial officials – including economic adviser Liu He and the heads of the securities and insurance commissions – issued a statement to buoy investor sentiment in bruised markets.
The International Monetary Fund (IMF) said recently that China’s debt had ballooned and was now equivalent to 234% of the total output. It said China needed to concentrate less on growth and instead help improve banks’ finances, among other efforts.
Meanwhile, the Chinese government says it has been taking steps to contain risky debt despite the impact that might have on economic growth – efforts the IMF said it recognized.
The government has promised to continue tackling local government debt, among other efforts, and on January 18 vowed to help state-owned enterprises “leverage and cut debt … and to repay their bonds on time this year”.
China’s strict anti-pollution measures, which were introduced across 28 cities in 2017, are also expected to hurt economic growth in the short term.
The measures have included shutting down or cutting back production at factories in heavy industry like cement and steel.
Households have also been asked to switch to natural gas and electricity from coal, in an effort to curb pollution.
However, this policy left millions without proper heating, and so was temporarily abandoned in December.
According to officials, Beijing’s air quality improved sharply in the winter of 2017. They also heralded their efforts as a “new reality” for China.
Li Keqiang said he would tackle state “zombie enterprises” producing more coal and steel than the market needed.
Similar pledges in the past have proved hard to fulfill.
More than 3,000 legislators are meeting in the Great Hall of the People.
The NPC and its advisory body hold ceremonial meetings every year known as “lianghui” or “two sessions”.
Image source Flickr
PM Li Keqiang described the world’s second-largest economy as a butterfly struggling to emerge from a chrysalis.
The premier said this transformation was filled with promise but also great pain.
Li Keqiang repeatedly paid tribute to Communist Party leader Xi Jinping and said that under the sound leadership of the Party, the Chinese people had the courage and ingenuity to overcome all difficulties.
His list of China’s difficulties ranged from the smog which blankets much of the country to the laziness of some government officials.
In a veiled reference to President Donald Trump’s complaints about China’s exchange rate and trade policies, PM Li Keqiang warned of a far more complicated global picture in the year ahead with China facing the threat of growing protectionism.
NPC leaders are tolerating slightly slower economic growth this year to give them more room to push through some painful reforms to deal with a rapid build-up in debt, Reuters reports.
On the subject of tackling China’s pollution issues, Li Keqiang pledged to “work harder” to address the issue exacerbated by heavy industry.
This year’s “lianghui” comes ahead of a major Chinese Communist Party congress, due to be held later this year.
That congress will confirm party chief and President Xi Jinping’s second term in office, as well as announce changes in the party’s top leadership.
Alibaba has announced record sales record its annual Singles Day event.
The e-commerce giant said sales this year had reached 121 billion yuan ($18 billion), a rise of 32% on 2015 sales which were worth $14.3 billion.
However, some have questioned the accuracy of the numbers, amid claims of inflated sales data at Chinese online retailers.
Merchants passing off counterfeit goods as genuine is also a problem in the industry.
The company reported 82% of purchases had been made on mobile phones during Singles Day.
Alibaba has also been experimenting with new technology including augmented reality and virtual reality to give shoppers other ways of buying items.
This year’s Singles Day had a blistering start with sales hitting $5 billion in the first hour, Alibaba said, though that total included pre-orders made by customers who could “lock in” prices. It took 90 minutes to hit that milestone in 2015.
Singles Day is held every year on November 11. The day is also referred to as Double Eleven because of its date.
Originally claimed as a celebration for China’s young singletons, Alibaba turned it into a shopping bonanza in 2009.
While Alibaba is undeniably the driving force behind Singles Day, other retailers have also started to piggyback off the idea, including extending the concept to Hong Kong and Taiwan.
Alibaba’s rival JD.com, which focuses more on electronics, reported receiving more orders in the first nine hours of trading on Friday than it had done during the whole of Singles Day 2014.
JD.com said sales passed last year’s Singles Day total in the early afternoon, but gave no figures.
As has now become tradition, Singles Day was kicked off with a televised gala event which this year included a performances by One Republic and appearances by basketball legend Kobe Bryant, soccer legend David Beckham and his wife Victoria Beckham.
Katy Perry, who had been scheduled to perform, withdrew citing a family emergency.
Analysts have predicted this year’s Singles Day could see Alibaba rack up sales of $20 billion despite a slowdown in China’s economy, partly due to the event having a broader audience.
Moody’s has cut China’s outlook from “stable” to “negative”.
While reaffirming its current debt rating, the US ratings agency warned that reforms were needed to avoid a downgrade.
Moody’s said the change in outlook was based on expectations that Beijing’s fiscal strength would continue to decline.
The negative outlook comes on the heels of fresh data suggesting China’s economy is continuing to lose steam.
Moody’s said it was concerned over China’s incomplete implementation of much needed reforms.
“Without credible and efficient reforms, China’s GDP growth would slow more markedly as a high debt burden dampens business investment and demographics turn increasingly unfavorable,” the agency said in a note.
“Government debt would increase more sharply than we currently expect.”
Moody’s did confirm China’s current Aa3 rating, saying that there was still time to address the current economic imbalances and implement reforms.
Just one week ago, China sought to assure the global economic community over the strength of its economy.
At the G20 meeting in Shanghai, China’s finance minister Lou Jiwei insisted Beijing could tackle the pressures it is currently facing.
China’s economy, the second-biggest in the world, is growing at the slowest rate in 25 years as it attempts to move from an export-led nation to one led by consumption and services.
The slowdown in China’s economy has created considerable uncertainty in financial markets and has led to sharp falls in commodity prices.
According to official figures, the Indian economy grew at an average rate of 7.5% in 2015, faster than the 6.9% growth in China.
In recent history it has been unusual, but not unprecedented, for India to grow faster than China.
It happened in 1981,1989,1990 and 1999, and 2015 was the first instance in this millennium, according to the IMF.
India’s government said growth in the October to December quarter was 7.3%, a slight drop on previous quarters which were revised sharply higher.
Even though the economy lost steam in the last quarter, its pace of expansion was faster than the growth posted by China in the same quarter.
India measures its economy over a fiscal rather than a calendar year.
The government of Narendra Modi said the Indian economic growth for the fiscal year ending March 2016 is forecast to accelerate to 7.6%.
However, some economists say the latest growth figures are at odds with other data for Asia’s third largest economy, including weak exports, railway freight, cement production and investment and flat order books.
A year ago India’s statistics ministry revised GDP growth rates higher – closer to that of China – by updating the base year used for price comparisons.
The Chinese economy grew by 6.9% in 2015, compared with 7.3% in 2014, marking its slowest growth in 25 years.
China’s growth, seen as a driver of the global economy, is a major concern for investors around the world.
The government had set an official growth target of “about 7%” for the world’s second-largest economy.
PM Li Keqiang has said weaker growth would be acceptable as long as enough new jobs were created.
However, some observers say its growth is actually much weaker than official data suggests, though Beijing denies numbers are being inflated.
Analysts said any growth below 6.8% would likely fuel calls for further economic stimulus. Economic growth in Q4 of 2015 edged down to 6.8%, according to China’s national bureau of statistics.
After experiencing rapid growth for more than a decade, China’s economy has experienced a painful slowdown in the last two years.
Some argue that China’s focus on creating an economy driven by consumption is misplaced. They say as the country attempts to rebalance its economy, it should focus on productivity in order to sustain high growth.
Asian markets traded lower on Wednesday, October 14, as investors digested disappointing economic data from China.
Chinese inflation figures came in weaker than expected, and came a day after trade figures showed a steep fall in imports.
Japan’s benchmark Nikkei index closed down 1.8% at 17,907.39.
China’s main index Shanghai Composite edged up 0.2% to 3,299.51, while in Hong Kong the Hang Seng index was down 0.61% at 22,460.16.
In Australia, the S&P/ASX 200 fell 0.56% to 5,173.80, while South Korea’s benchmark Kospi index dropped 0.55% to 2,007.72.
The latest official data from China – the world’s second largest economy – showed consumer inflation slowed to 1.6% in September from 2% in August. Wholesale inflation was 5.9%, unchanged from the month before.
The wholesale numbers were in line with expectations, but consumer inflation was expected to rise 1.8%. China’s target for consumer inflation is about 3%.
Economic data released on October 13 showed that imports in September fell by a more-than-expected 17.7% in yuan-denominated terms, while exports fell 1.1% from a year earlier.
As it continues to face a slowdown in economic growth, China is trying to move away from an export-led economy towards one led by consumer demand.
The sharp fall in imports posted on October 13 raised concerns around the world that domestic demand in China is weakening.
China’s imports fell a more-than-expected 17.7% in yuan-denominated terms in September 2015, while exports fell 1.1% from a year earlier, official figures show.
The new figures leave China with a trade surplus of 376.2 billion yuan ($59.4 billion).
The steep fall in imports compares with a fall of 14.3% in August and continues to reflect lower commodity prices globally.
China recently revised down its 2014 economic growth from 7.4% to 7.3%.
The revision marks its weakest growth for almost 25 years. After decades of double-digit growth, the government is expecting to see growth of about 7% in 2015.
China is attempting to shift from an export-led economy to a consumer-led one.
Exports in September held up better than expected, after some had forecast a fall of as much as 7%.
However, the significant fall in imports means domestic demand is not as strong as the government would have hoped.
China’s official trade numbers in US dollar denominated terms were reported shortly after the yuan-denominated numbers.
They showed exports fell a less-than-expected 3.7% in September, while imports slumped 20.4% from a year earlier. The numbers leave the country with a surplus of $60.34 billion for the month – which the government said was higher than expected.
Currency conversion factors based on US dollar and Chinese yuan movements over the last year mean some official numbers from the mainland are now reported in both currencies.
The World Bank has decided to cut Asia growth forecast for 2015 and 2016, because of the risks posed from a sharp slowdown in China and raising US interest rates.
The bank now expects growth in developing East Asia and the Pacific to be 6.5% in 2015 and 6.4% in 2016, down from an earlier forecast of 6.7%.
The latest estimate is even lower than growth of 6.8% in 2014.
Major development banks have recently revised lower their growth forecasts.
Last month, the Asian Development Bank said slowing growth in China would drag down the developing region’s growth to 5.8% in 2015.
The International Monetary Fund (IMF) also flagged in September that slowing growth in the world’s second largest economy posed a threat to the global economy.
“Developing East Asia’s growth is expected to slow because of China’s economic rebalancing and the pace of the expected normalization of US policy interest rates,” said the World Bank’s regional chief economist Sudhir Shetty in a statement on October 5.
“If China’s growth were to slow further, the effects would be felt in the rest of the region, especially in countries linked to China through trade, investment and tourism.”
East Asia accounts for almost two-fifths of the world’s economic growth, according to the World Bank.
The World Bank now expects China’s economy to grow 6.9% this year and 6.7% in 2016, down from an earlier forecast of 7.1% and 7% respectively.
China is headed for its slowest growth in a quarter of a century in 2015 and calls are growing that it may undershoot the government’s official target of 7%.
Interest rates in the US, meanwhile, are expected to rise for the first time in nearly a decade in the coming months, which could result in a flood of capital leaving emerging markets as Asian currencies are hit.
“While this increase has been anticipated and is likely to be orderly, there is still a risk that markets could react sharply to such tightening, causing currencies to depreciate, bond spreads to rise, capital inflows to fall, and liquidity to tighten,” the World Bank said.
China’s stocks fell on September 14 after economic data released on the previous day underlined fears growth is slackening.
Growth in both fixed-asset investment, up 10.9% in August from a year ago, and factory output, at 6.1%, came in below expectations.
The Shanghai Composite index closed down 2.67% at 3,114.80, while Hong Kong’s Hang Seng was flat, up just 0.16% at 21,538.97.
The Shanghai index has lost nearly 40% since its peak in mid-June.
Shares of four of China’s largest brokerages tumbled as much as 7% following news of fines and penalties from the securities regulator for failing to conduct proper checks on clients.
The four were fined 178.5 million yuan ($28 million) and had 62.4 million yuan of profits confiscated, according to the securities filings by the companies.
Regulators have been cracking down on trading firms to stem the volatility that has rocked the markets for the past few months.
Photo Getty Images
The rest of Asian shares traded mixed, despite Friday’s positive finish on Wall Street, with investors cautious in advance of the Federal Reserve meeting this week.
All eyes are on the US policy meeting, which ends with a decision on September 17 on whether to raise interest rates for the first time in almost a decade.
Economists are split on whether the long-awaited move will happen.
Japan’s benchmark Nikkei 225 index finished down 1.6% to 17,965.70 points.
Japanese investors are also looking ahead to the conclusion of the Bank of Japan’s two-day policy meeting on Tuesday, where they are expected to maintain their easing program.
In Australia, the benchmark S&P/ASX 200 closed up 0.6% to 5,102.30.
Shares in Oil Search reversed earlier losses to close up 0.2% after it rejected an $8 billion takeover proposal from Australia’s biggest energy company Woodside Petroleum, saying the offer was too cheap.
South Korea’s benchmark Kospi ended down 0.5% to 1,931.46.
According to latest figures, growth in China’s investment and factory output in August 2015 has come in below forecasts, in a further indication that the world’s second-largest economy is losing steam.
Factory output grew by 6.1% from the year before – below forecasts of 6.4%.
Growth in fixed-asset investment – largely property – slowed to 10.9% for the year-to-date, a 15-year low.
Growing evidence that China’s economic powerhouse is slowing down has caused major investment market falls.
Other indications that China’s economy is weakening can be seen in falling car sales and lower imports and inflation.
Chinese manufacturers cut prices at their fastest pace in six years, largely on the back of a drop in commodity prices, which have dropped sharply over the past year as demand from China faltered.
Last week, Chinese PM Li Keqiang, said his country remained on track to meet all its economic targets for this year despite the economic data.
China has already cut interests rates five times since November 2014 to encourage lending and spur economic activity, along with other measures to boost growth.
PM Li Keqiang pledged that China would take more steps to boost domestic demand and that it would implement more policies designed to lift imports.
China recently revised down its 2014 growth figures from 7.4% to 7.3% – its weakest showing in nearly 25 years.
For 2015, the Chinese government is targeting annual economic growth of about 7%.
Meanwhile, the Chinese authorities said they would take new steps towards a more market-based economic system by offering shares in state-owned businesses to private investors.
The move, which they said would help improve corporate governance and asset management, is planned to take place before 2020.
China’s industrial economy is dominated by 111 conglomerates which are state owned.
Asian stock markets were mostly lower on September 10 as economic data from Japan and China made investors cautious.
After surging almost 8% on September 9, Japan’s Nikkei 225 index closed down 2.5% at 18,299.62, among Asia’s big losers.
Worries about a slowdown China and the impact of a US interest rate hike also dented investors’ confidence.
Analysts said losses were to be expected considering Wednesday’s significant gains – particularly in Japan.
Core machinery orders in Japan, which are a key indicator of capital expenditure, fell by 3.6% in July compared with June.
The renewed decline suggested that business investment may fall yet again this quarter, economists said.
In Australia, the S&P/ASX 200 closed down 2.4% at 5,098.40, following Wall Street lower and after two sessions of gains.
The Australian dollar fell together with the New Zealand dollar on Thursday after New Zealand’s central bank cut interest rates to 2.75% and said it may introduce further easing measures to boost its flagging economy.
In China, the benchmark Shanghai Composite ended down 1.4% to 3,197.89, while Hong Kong’s Hang Seng lost 2.6% to 21,562.5 points.
Official figures released on September 10 showed China’s consumer price index (CPI) unexpectedly rose to 2% in August from a year ago marking a one-year high.
The rise was due to higher food prices. Pork prices, which weigh heavily on consumer prices in China, rose from 16.7% last year to 19.6% in August.
China’s producer price index (PPI) fell 5.9% – marking its 42nd consecutive month of declines – and the biggest drop since 2009.
The one bright spot in Asia was South Korea’s Kospi which closed up 0.7% to 1,947.30 points.
According to latest trade figures, China’s August imports fell 14.3% in yuan-denominated terms from a year ago, while exports fell by 6.1%.
The steep fall in the value of imports reflects lower commodity prices globally, particularly crude oil.
The numbers mean China’s monthly trade surplus expanded by close to 40% from the month earlier to 368 billion yuan ($57.8 billion).
China recently revised down its 2014 economic growth from 7.4% to 7.3%, its weakest for almost 25 years.
In US dollar denominated terms, exports for the month of August fell 5.5% from a year earlier – slightly less than expected – while imports fell by 13.8%, leaving China with a surplus of $60.24 billion.
Currency conversion factors based on US dollar and Chinese yuan movements over the last year mean some official numbers from the mainland are now reported in both currencies.
A fall in both import and export figures had been expected as China’s economy slows, though analysts said the drop in imports was greater than forecast.
Global stock markets have been hit by renewed fears over China’s economic growth, with the main indexes falling sharply.
Wall Street traded sharply lower, with the Dow Jones down more than 300 points, or 1.9%, at 16,215.
European markets also fell, with the London’s FTSE 100 closing down 3% and France’s CAC 40 and Germany’s DAX about 2.4% lower.
Earlier, figures for August showed China’s manufacturing contracted at its fastest pace in three years.
The official manufacturing purchasing managers’ index (PMI) dropped to 49.7 from 50 in July. A figure below 50 indicates contraction.
It follows recent turmoil in the markets sparked by concerns over a slowdown in the world’s second-largest economy.
Energy companies led the way down on the Dow, with Chevron and Exxon Mobil down about 3%. This followed a fall in the oil price, which was down more than 4% at $51.89.
Before Tuesday’s fall, the price of oil had risen by about 25% in the past three trading sessions.
The S&P 500 was also down about 2% at 1,934.18, while the tech-heavy NASDAQ was 1.6% lower at 4,699.21.
Global markets sustained heavy losses in August – for both the UK’s FTSE 100 and the US’s S&P 500, it was the worst month since May 2012.
As well as the weak China factory data, investors are unsure about the US Federal Reserve’s next move. Many had penciled in the a rate rise – the first move since the financial crisis – for September. However, given the recent stock turmoil, analysts seem less certain.