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China’s Economy Roars Back: Fiscal Growth, Housing Rebound, and PMI Boost Optimism

China's Economy Roars Back: Fiscal Growth, Housing Rebound, and PMI Boost Optimism

China’s economy is showing signs of resilience, with positive developments in fiscal revenue, housing, and manufacturing painting a brighter picture for the year ahead. This news has sent waves of optimism through markets, raising questions for traders about the future of the USD/CNH exchange rate.

China’s Fiscal Muscles Flex

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China’s fiscal revenue growth accelerated in 2023, exceeding expectations. November saw a 4.3% year-on-year increase, compared to 2.6% in October. This surge indicates stronger economic activity and government support, bolstering confidence.

Housing on the Upswing in China

A private survey revealed that new home prices in China rose at their fastest pace since August 2021 in January. This turnaround, following months of decline, suggests a potential recovery in the crucial housing market, further fueling economic growth.

In January 2024, China witnessed its fastest monthly increase in new home prices since August 2021, driven by extensive government support measures. A study by China Index Academy highlighted that average prices in 100 cities rose for the fifth consecutive month. The month-on-month gain in January was 0.15%, surpassing December’s 0.1% rise.

The count of cities experiencing month-on-month price growth climbed to 49, up from 47 in the previous month. These changes reflect the Chinese government’s effort over the past year to rejuvenate the real estate sector, which faced challenges due to a debt crisis and regulatory measures aimed at reducing high leverage in the sector.

Chinese Factories Fire Up

The Caixin China General Manufacturing Purchasing Managers’ Index (PMI) jumped to 52.9 in January, exceeding forecasts and signaling expansion in factory activity. This rise, driven by a boost in export orders, indicates improving manufacturing health and potential trade gains.

Technical Outlook: USD/CNH Under Pressure?

Traders, take note: this positive news could impact the USD/CNH exchange rate.

  • Current Price: 7.185 CNH per USD (as of Jan 31, 2024)
  • Recent Low: 7.22 CNH per USD (suggests weakening US dollar)
  • Moving Averages: Both 50-day and 200-day MAs are trending downwards, indicating further potential depreciation of USD against CNH.
  • Relative Strength Index (RSI): Currently at 42, suggesting neither overbought nor oversold territory, but room for movement.

Word on the Street

While the outlook is positive, remember:

  • Global economic headwinds and geopolitical tensions could still create turbulence.
  • China’s property market recovery remains fragile, requiring sustained support.
  • Policy decisions and data releases continue to influence market sentiment.

The Big Takeaway

China’s improving fiscal health, housing recovery, and manufacturing expansion are positive signs for its economy. This, coupled with technical analysis suggesting a weakening USD against CNH, creates an intriguing scenario for traders. However, caution and close monitoring of developments are crucial in this dynamic environment.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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