The Chinese economy may not grow well.

The continuous depreciation of the Chinese yuan over the past few months, including the recent adjustment by the People's Bank of China (PBOC), reflects efforts to alleviate pressure on China's exports. However, China continues to face persistent pressures from capital outflows and its own economic weaknesses.

China's trade balance, announced last Wednesday, reached its lowest level in 13 months, with exports declining by 7.5% in May compared to the previous year. This marks the largest drop since January. Imports also contracted by 4.5% in May compared to the previous year, following a 7.9% decline in April. Prior to this, economists in the Reuters poll had projected a marginal 0.4% decrease in exports in May and an 8.0% decline in imports. The subdued demand for Chinese goods from foreign markets remains a contributing factor.

Analysts at UBS have pointed out that while most investors had already anticipated lower export volumes, the magnitude of the decline in this round may have a more negative impact on China's economy.

Furthermore, the contracting import and export figures in China also indicate a sluggish economic growth in Europe and the United States, as well as strained relations. In light of these developments, Antony Blinken, the US Secretary of State, plans to visit China, raising hopes of efforts to reduce political tensions between China and the United States.

China's Consumer Price Index (CPI) data is set to be announced tomorrow, with expectations of a 0.4% figure, compared to the previous 0.1%. The projected low inflation indicates that there is still room for further monetary stimulus by the People's Bank of China (PBOC) to boost the economy.

Additionally, there are attempts to strengthen the yuan by the regulatory arm of the PBOC, as it has ordered major state-owned banks to reduce deposit interest rates for US dollar deposits, allowing Chinese banks to offer interest rates no higher than 4.3% for deposits of $50,000 or above. This ceiling rate reduction from the previous 5.3% aims to support the value of the yuan.

Lin Rongcheng, Head of Investment Strategy at BOC International, stated that the yuan depreciation is a result of China's real economic recovery being lackluster and a reflection of the low-level economic growth trend.

Technical analysis data (5H)

Resistance: 7.1402, 7.1471, 7.1525

Support: 7.1279, 7.1225, 7.1156

Source: Investing.com