China data to remain in spotlight after yuan’s slide, stock market turmoil
Having rocked world markets at the start of 2016, China will remain in the spotlight in the coming week, with data that may help gauge how sharply growth is slowing in the world’s second-largest economy.
The tremors set off by the 1 percent slide in China’s yuan, from a hammering of Shanghai stocks to oil’s slide to a 12-year low and Wall Street’s weakest start to a year since 2001, echoed the China-triggered turbulence of last August.
Back then Beijing’s 2 percent devaluation of the yuan in the midst of an emerging market and commodity rout led to Wall Street’s biggest one-day drop in four years.
Both episodes show the depth of concern about the strength of the Chinese economy.
A raft of data in the coming weeks, starting with export and import figures on Wednesday, is likely to show activity in the world’s second-largest economy continuing to slow, Reuters polls showed.
Exports were expected to have dropped 8 percent in December after sliding 6.8 percent in November, and imports may have declined 11.5 percent in December from a year earlier, following an 8.7 percent drop in November, the median forecast of 25 analysts polled by Reuters showed.
The trade data will set the stage for the release of fourth quarter and full-year gross domestic product (GDP) data on Jan. 19 along with industrial output, retail sales and fixed asset investment data.
“While the scale of recent price action is alarming, the story is not a new one,” Goldman Sachs analysts said, noting that European equities, whose sales are highly exposed to China, had suffered their worst start to a year since the early 1970s.
“The broader concerns are a continuation of a theme that has been running for some time: China weakness, the industrial slowdown and collapsing commodity prices.”
While China’s major stock indexes regained some ground on Friday, Beijing letting the yuan depreciate faster has raised concerns that it might be aiming for a competitive devaluation to help its struggling exporters.
Some investors fear that is a signal that its economy is even weaker than had been imagined.
