The growth of the Chinese economy has begun to slow down in the mid-term.

The Chinese yuan has started to slightly weaken after strengthening last week, as a major Chinese bank reported another round of selling US dollars to support the yuan from continuous depreciation. Moreover, Moody's downgrade in the credit outlook for the Chinese government has directly impacted the currency. Investors are now looking towards the upcoming meetings, including the Politburo and the Central Economic Work Conference, as China is expected to discuss economic policy plans and targets for 2024.

Moody's downgraded the outlook of China's credit rating from "Stable" to "Negative" while maintaining the credit rating at A1 on December 5th. This downgrade was attributed to increased risks from declining mid-term economic growth, continuous structural adjustments in the real estate sector, excessive government support negatively impacting China's treasury, and uncertain GDP growth projections of 4.0% for both 2024 and 2025.

In addition, China's Purchasing Managers' Index (PMI) for the manufacturing sector increased to 50.7 in November from 49.5 in October. This growth was due to increased production and purchasing capabilities supported by continuous government efforts to bolster manufacturing capacity in the long term. However, new orders reaching a four-month high led to a further reduction in layoffs while raw material costs increased slightly.

The PMI for the services sector also increased to 51.5 in November from 50.4 previously, indicating moderate growth amid heightened competition. This growth was supported by increased domestic and international demand, resulting in significantly higher new orders, although there was a slight decrease in hiring due to increased labor and raw material costs.

Profits from Chinese industrial companies decreased by 7.8% year-on-year to 6.11542 trillion yuan, despite renewed government support measures amidst the still-vulnerable economy. Private sector profits saw a 1.9% decrease, with the most significant drop observed in profits from chemical manufacturing and exports, which declined by as much as 42.8%. However, profits for the electricity and energy industries increased by 50.1%.

China's 10-year government bond yields remained stable at below 2.7%, facing renewed pressures primarily due to Moody's adjustment of China's government credit outlook. Challenges in the real estate sector and slowing growth have become significant factors prompting investors to increasingly divert their investments away from China.

Techical analysis data (5H)

Resistance: 7.1594, 7.1609, 7.1633

Support: 7.1555, 7.1531, 7.1515

Source: Investing.com