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In terms of the USD, it has a yield advantage over the CNH and this is likely to continue with the PBOC of China under pressure to cut rates to help an economy that’s slowing.  All recent data has missed forecasts. Exports are falling and domestic demand can’t make up the shortfall. In terms of data missing forecasters estimates GS note: "Our China MAP surprise index fell by the most since the initial Covid outbreak in early 2020".


China PMI's are turning down which normally precludes Central Bank policy easing.


China's economy will also slow due to Government policy. A summary below from TS Lombard on the problems ahead for China.

“China's economic growth will dramatically decelerate and there is much skepticism about Xi Jinping's ability to rejuvenate the country's fortunes. Forecasts of China surpassing the US in GDP and becoming the number one global economy are being revised. Xi's leadership is primarily responsible for the current state of China's economy, as his policies prioritize social fairness and party control over economic reforms. Xi's crackdown on private-sector firms, especially in the tech, internet, and education sectors, has had negative consequences for the economy. Xi's push to tighten state control over information and data raises risks for businesses and investors in China, limiting transparency and increasing uncertainty” (TS Lombard)

A major problem for China is the huge debts that are in the economy and one sector stands out the property market...

China’s Property Bubble

It's the biggest investment market in the world and could crash. The latest estimates by Rogoff and Yang conclude that real estate development, directly and indirectly, has been responsible for 25 percent of total economic activity in the Chinese economy. Based on census data, Rogoff and Yang estimate that 43 percent of all homes in China have been built since 2010, with 68 percent built since 2000, and 88 percent since 1990.

If you put this in relation to the total population then you get in just a single generation, China has built enough homes to house a billion people. This is a huge amount of properties and many are empty house prices are falling and look set to fall further. The size of the market is huge and property prices are looking weak this year.




China has massive problems and we noted this chart at the start of the year and the view is coming to fruition.


Technical Analysis 

We are in a bull market now and expect recent highs to be tested and broken...


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