The Chinese economy expanded in Q3 by 6.50% yearly and 1.60% quarterly (prior: 6.70%, 1.80%), signalling a slowdown in growth, driven by weakness in manufacturing. The impact of US sanctions (total: 10% tariffs on USD 200 billion Chinese imports, implemented on 24 September) are weighing on the economy and expected to reach 25% by year-end if no agreement between both counterparts is found. High expectations relate to the G20 meeting in Argentina (30 November-1 December), where the US and Chinese presidents will discuss the matter. Although the economic outlook remains tough for the Chinese economy given trade war and credit risk, Chinese regulators maintain a reassuring tone, as central bank governor Yi Gang confirmed financial support of private companies (i.e. credit granting), thus sustaining the economy via stimulus. For now, Chinese authorities remain on track with their GDP growth target of 6.50% for 2018. Accordingly, CNY is under pressure but still remains below USD/CNY fixing at 6.9387, which means that the Renminbi remains in place, despite further depreciation risk amid a weaker economic outlook.
By Vincent Mivelaz