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ECONOMY: A bit of a mixed bag
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A bit of a mixed bag

By Anthony Lawry

BT 201709 ECONOMY 01
      7月份经济指标显示中国经济基本面强劲,但交易数据略低于预期。此外,与美国的贸易紧张关系仍然存在,导致政策环境可能更加紧张。此外,股市相当活跃,但自年初以来人民币及美元持续走软。总体来说,尽管全年预期增长略有下降,但我们仍然看到一个健康的经济趋势。


      贸易数据显示,7月份出口额同比上涨10.9%,与6月份强劲的11.3%的增长率相比略有下降。另一方面,进口额上涨16.6%。7月份中国的贸易顺差达到了46.08亿美元,这是今年以来的第二高峰值。但与16年的2571亿美元相比,今年只达到了1850亿美元,中国经济学家朱利安•埃文斯普里查德(Julian Evans-Pritchard)认为,由于生产者物价指数上涨导致的负面价格影响,这一下降可以理解。


      股票市场也是有升有降。恒生指数上涨近2000点,但深圳成指平均亏损约500点。上证指数本月涨幅仅为100点。尽管如此,MSCI的iShares主要新兴市场基金则创下历史新高。


      过去一个月,中国人民币兑美元汇率上涨128个基点至6.6642美元,是10个月以来的最高水平。

BT 201709 ECONOMY 03
July brought forth another month of mixed data as economic indicators show strong fundamentals in the Chinese economy but with slightly weaker numbers than expected trade data. Furthermore, trade tensions with the United States persist resulting in the likelihood of a tighter policy environment. In addition, equity markets were quite active with different indices delivering different results by the end of the month’s trading. The Remnimbi has advanced even as the US dollar continues to weaken since the beginning of the year. Overall, we are continuing to see an economy that is confident in its ability to produce healthy economic trends despite the slightly lower anticipated growth for the year.
 

BT 201709 ECONOMY 02
Trade data suggested that exports rose 10.9% year-on-year in July, at least according to a median estimate from a poll of analysts which would be down just slightly from June's robust 11.3% growth. On the other hand, imports were expected to increase by 16.6%. Meanwhile, China's trade surplus in July ticked up to $46.08 billion, which would be the second highest this year. However, it had shrunk to $185 billion in the first half of this year from $257.1 billion in the same period in 2016 as imports picked up. Yet, despite these positive numbers, the results were all short of expectations. The declines can be partly explained, according to Capital Economics China economist Julian Evans-Pritchard by negative price effects due to cooling producer price inflation. It could also be an indicator that domestic consumption or demand is dropping lower.
 

hl economyIn spite of this, the trade deficit with China’s largest export market, the United States, actually rose by 6.5% during the first two quarters to add up to $117.5 billion. This can only exacerbate the fury of President Trump’s constant arguments that the trade imbalance between China and the United States inflicts a significant amount of pain on American exporters (only 16% of the US economy) despite the fact that it increases standards of living for 320 million people living there. A month prior, Chinese customs data had demonstrated that China ran a $25.4 billion surplus with the US resulting in a better economic environment between the US and China, albeit briefly.
 

While the economic data was a bit of a mixed bag, so too were equity markets. Hang Seng rose nearly 2000 points, but Shenzhen was flat after making up around 500 points of losses. The Shanghai index gained only a modest 100 points for the month. In spite of this, MSCI’s iShares major emerging market fund (most of the equities of which are Chinese) has seen record highs with most of its recent advances coming in over the past month. However, the latter’s electronically traded fund is highly correlated with overall global markets which have witnessed record highs that have been unprecedented for modern equity prices, thus speculating fear of an equity bubble.
 

BT 201709 ECONOMY 04
This past month, the central parity rate of the Chinese Yuan strengthened by 128 basis points to end up at 6.6642 against the U.S. dollar, the highest level achieved in more than 10 months. While a weaker dollar has been contributing to the climb of the Yuan, which has strengthened by nearly 3,000 basis points since the beginning of this year, the advance this week came despite a rebound of the U.S. dollar index, thus indicating a change in market expectations. The People's Bank of China (PBOC) said recently that foreign exchange reserves rose for a sixth month in July to reach 3.1 trillion U.S. dollars, which increased from 23.9 billion US dollars from a month earlier. It is the first time since June 2014 that reserves have expanded for six straight months. In a somewhat related note, the PBOC also pointed out that cross-border capital flow has stabilized largely as a result of tighter regulations and oversight on high net worth individuals attempting to take their money out of Chinese banks in times of market spikes.
 

BT 201709 ECONOMY 05According to China's National Bureau of Statistics (NBS), retail sales grew by 10.4% in the period from the beginning of the year till July, a figure that was below both the 11% pace witnessed in June and forecasts for a smaller deceleration to 10.8%. Cosmetics, home appliances, office supplies, furniture and building materials all grew faster than total retail sales over the past 12 months, while those for garments, jewelry, personal care, telecommunications and oil products came in below the 10.4% average.


Industrial output and urban fixed asset investment were also down. The NBS said that industrial output grew by 6.4% in the 12 months till July, a significant miss on the 7.2% increase that was expected. The figure was also well below the 7.6% pace reported in the year till June. Since the beginning of the year, output of cement, automobiles, and crude oil fell.
 

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