China will have a big economic stimulus.

The yuan has been continuously depreciating due to unfavorable economic data. Recent reports have revealed that leading Chinese banks have reduced their holdings of US dollars in the market to support the yuan and prevent further depreciation.

Despite this, China's GDP growth in the first quarter performed better than expected, reaching 2.2% compared to the projected 1.7%. However, China has already anticipated that GDP growth for the year will be only 5%, lower than the previously estimated 5.5%.

Import and export figures also serve as indicators of China's future economic trends. Import figures have increased to $218 billion, while exports have decreased to $284 billion. Although there is still a trade imbalance between imports and exports, import figures have shown a continuous upward trend since 2016, indicating that China's economy may still have the potential to grow, although not at the same rate as in the past. This could be influenced by a declining workforce and an increasing elderly population due to China's one-child policy.

China's economic stimulus measures, along with the economic data announced in the previous period and the reported conflicts, will undoubtedly have an impact on investor confidence and investment. Investors expect to see measures that can stimulate the economy further and restore the declining confidence. Mr. Song Zheng, the head of Asia-Pacific economic research at Pictet Wealth Management, mentioned the reduction of short-term and medium-term loan interest rates, stating that "a 0.10% reduction in interest rates doesn't do much, but the point is the policy signal. With measures to stimulate the economy further, it is hoped that the perspective on China can be changed."

Looking at the government's side, it is evident that there has been a continuous budget deficit and a tendency to increase it every year. This indicates that government spending is also expected to increase continuously. The significant increase in government spending will have an impact on the debt accumulated by the government. The debt-to-GDP ratio has been continuously increasing, and in the past year, it reached as high as 76.9%.

Mr. Kristoffer Borgli, a currency consultant at OCBC, stated, "A higher midpoint could signal to the market that the central bank and policymakers are closely watching the movement of the exchange rate, especially when the yuan approaches the 7.2 level against the dollar."

In addition, the data on consumer consumption, manufacturing, and the real estate market, which has been slower than expected for several consecutive months, indicates that China's economic recovery is lower than anticipated. While the restoration of confidence appears to be a long-term project, investors are preparing themselves for a longer game and a slower recovery.

Technical analysis data (5H)

Resistance: 7.2510, 7.2578, 7.2697

Support: 7.2323, 7.2204, 7.2136

Source: Investing.com