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August 7, 2015

The Month In Charts: Tracking The Chinese Market And Economy

by Vincent Flasseur.

While much attention in recent months has been focused on China’s stock market volatility, Charts of the Month looks at a number of market and economic indicators to get a broad view of the country’s current situation.

China’s economy likely showed renewed signs of weakness in July after a brief pick-up in June, Reuters polls showed, reinforcing expectations that Beijing will need to roll out more policy support to meet its full-year growth target. Panic selling in the country’s stock markets early in the month also likely chilled consumer and business confidence, though unprecedented government support measures appear to have stemmed the rout for now, reports Reuters in this story.

By mid-June, the Shanghai Shenzhen CSI 300 Index had more than doubled in value, but by mid-July was down by about one-third from its peak.

While local Chinese fret over the bursting of the Shanghai stock bubble, global investors are more worried about the yuan currency, which once seemed destined to rise inexorably.

A decade after China released the yuan from its peg to the dollar, ever more international money managers no longer regard the currency as a one-way appreciation bet that will augment their returns on stocks and bonds in dollar terms.

Meanwhile, China’s accumulation of gold reserves was also linked to its currency as the central bank announced on July 17 that its reserves stood at 1,658 tonnes at the end of June, up 57 percent from the last time it adjusted its reserve figures more than six years ago.

The People’s Bank of China said investment in gold would be beneficial for risk management and would help guarantee the security, liquidity and value of China’s international reserves.

A WikiLeaks cable in 2011 cited a Chinese newspaper as saying that the country’s large gold reserves would be “beneficial in promoting the internationalization of the RMB [renminbi currency].” (The renminbi is the official name for the currency and the yuan is the main unit of the currency.)

Since 1990, China’s economic expansion affected scores of countries through its balance of trade. Now, its gearshift to slower growth is hitting them on the way down, whether Latin American commodity exporters or Asian countries whose factories are part of its global supply chain.

China imports $50 billion a month less than during 2013 peaks while the latest monthly exports were $26 billion off the highs at the end of last year. Latest data shows imports, often semi-finished goods for re-export, fell 15.5 percent in the first half of 2015 from year-ago levels.

Shanghai Composite Index and Shanghai Shenzhen CSI300 Index

chart 1 A breathtaking rise and steep fall have characterized the Shanghai market’s benchmark indices in 2015.

Click here to view the gallery.


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