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5 Jun 2013
Flash: Strong Yuan part of rebalancing China´s economy - BBH
FXstreet.com (Barcelona) - Brown Brothers Harriman analysts feel that it is possible that the strong yuan is part of the recent focus on rebalancing the economy.
They add that Chinese officials have begun preparing the markets for slower growth ahead, with the IMF putting in its two cents last week by cutting its China growth forecast for 2013 from 8% to 7.75%. They feel that if rebalancing the economy is a major factor behind the recent yuan appreciation, then this would suggest less in the way of potential monetary easing ahead. They tend to favor this view, as recent data show that the amount of growth generated by a dollar invested in China is deep in diminishing returns territory. They whether China really wants another round of inefficient investments in order to boost growth over the short-term? Further, they write, “Of course, we acknowledge that trying to discern China’s macro policy is fraught with danger, as so much guesswork is necessary due to the opaque nature of mainland policymakers. We do think, however, that China is unlikely to provide much in the way of positive surprises near-term for global markets that are starving for good news.”
They add that Chinese officials have begun preparing the markets for slower growth ahead, with the IMF putting in its two cents last week by cutting its China growth forecast for 2013 from 8% to 7.75%. They feel that if rebalancing the economy is a major factor behind the recent yuan appreciation, then this would suggest less in the way of potential monetary easing ahead. They tend to favor this view, as recent data show that the amount of growth generated by a dollar invested in China is deep in diminishing returns territory. They whether China really wants another round of inefficient investments in order to boost growth over the short-term? Further, they write, “Of course, we acknowledge that trying to discern China’s macro policy is fraught with danger, as so much guesswork is necessary due to the opaque nature of mainland policymakers. We do think, however, that China is unlikely to provide much in the way of positive surprises near-term for global markets that are starving for good news.”