The economy in China has started to grow but still faces challenges from a weak yuan.

The yuan has weakened again due to concerns arising from central bank meetings in several countries this week, especially the Federal Reserve (Fed) in the United States, the Bank of England (BoE), and the Bank of Japan (BoJ), which are expected to discuss future policies and are anticipated to raise interest rates in several countries in their upcoming meetings.

The central bank meetings have caused currency exchanges to shift towards more stable currencies. Additionally, China's slowing economic growth and multiple interest rate cuts by the People's Bank of China (PBOC) have made it inevitable that the yuan will weaken further.

Recently, the PBOC lowered the Reserve Requirement Ratio (RRR) by 25 basis points for all banks to maintain liquidity in the banking system and support economic recovery. This is the second RRR cut this year, resulting in the benchmark interest rate for large banks being at 10.5%. Furthermore, the yuan's depreciation prompted the PBOC to reduce the reserve requirement ratio for foreign currency deposits by 200 basis points to 4%, effective from September 15th.

China's retail sales increased by 4.6% year-on-year (YoY) in August, significantly exceeding market expectations of 3.0%. However, there are still some sectors where sales continue to decline, such as construction materials, due to the continued significance of the real estate sector in the Chinese economy. This has prompted the government to stimulate overall credit demand and address stability issues in the troubled real estate sector.

China's industrial production grew by 4.5% YoY, showing rapid expansion from 3.7% in July, and is considered a robust expansion of the industrial output, especially since April. China's industrial sector continues to receive sustained government support to bolster economic recovery. Additionally, the government aims to stimulate overall credit demand and maintain stability in the troubled real estate sector.

Investment in China's fixed assets expanded by 3.2% YoY, reaching CNY 32.70 trillion in the first eight months of the year 2023. However, investment in the real estate sector saw an 8.8% decrease, leading to a 0.1% YoY decline in average new home prices in 70 major Chinese cities. This is attributed to weak consumer spending and ongoing concerns about unemployment in China.

Investment in China's fixed assets expanded by 3.2% YoY, reaching CNY 32.70 trillion in the first eight months of the year 2023. However, investment in the real estate sector saw an 8.8% decrease, leading to a 0.1% YoY decline in average new home prices in 70 major Chinese cities. This is attributed to weak consumer spending and ongoing concerns about unemployment in China.

Techical analysis data (5H)

Resistance: 7.2979, 7.3006, 7.3028

Support: 7.2931, 7.2910, 7.2883

Source: Investing.com