It was not been a December to remember for China. All key manufacturing indicators were down and pointing to a larger slide in production, and January’s HSBC flash manufacturing PMI showed that the trend continues. With a preliminary print of 49.6, China’s manufacturing sectors are now in contraction, a six-month low.
Asian equities and the Australian dollar are down by association as Chinese data is highly regarded as a proxy for global growth expansion. HSBC chief economist on China, Qu Hongbin said “the policy focus show tilt towards supporting growth.” Gross domestic product for the fourth quart was below estimates at 7.6 percent, and analysts expect a further deterioration in expansion. This is troubling for Premier Li Keqiang because a GDP figure below 7.4 percent will begin to squeeze employment.
The HSBC flash manufacturing index is a accurate prelim into the state released data issued by the China Federation of Logistics Purchasing and National Bureau of Statistics.
The USDCHN has bounced back after the renminbi hit a 20-year high after breaking through a symmetrical triangle to the downside. After the high was made on January 13, there was a probable pullback point of 6.0462 issued. This resistance level is in reach, and there could be a potential to surpass this level as another round of tapering this month should firm the US dollar.
The USDCHN is currently 6.0332.