China's strong exports and balance of payments could fade over time as growth across developed economies decelerates. For those who have RMB exposure, we think it makes sense to hedge at current levels. In addition, capital flows tend to be well correlated to property prices, with prices now in decline there is a chance capital outflows pick up putting further downward pressure on the currency. Beijing has focused on boosting liquidity, lower rates, tax rebates, and improved logistics. This has worked to the extent that global demand has remained strong and China’s supply stimulus could deliver cheap exports. However, domestic demand has remained weak, causing most of the private sector to hold back. Until policy shifts toward treating this demand deficit, it’s hard to see a substantial turnaround in the near future - J.P. Morgan
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