A considerable flight of capital used to be one of the key factors contributing to the Chinese economic growth. Both private and institutional investors are afraid of a further economic slowdown and start selling Chinese assets, including the Renminbi (the Chinese Yuan).
According to the recent report published by the People’s Bank of China, private investors sold 3.8 billion CNY (equal to $597 million).
According to Bocom International Holdings, local investors know the real state of affairs better than foreigners. It will be rather difficult for China to sell the existing economic problems.
Last quarter, the pace of the GDP growth in China slowed down to 7.6%. The local industrial production is growing at the lowest pace in 3 years. July’s export increased only by 1% (y/y). Chinese companies have been seeing an income decline for the 3rd consecutive month. Shanghai Composite dropped 3.3% in comparison with January 2012.
Forex.
USDCNY is trading within the 6,3701-6,3577 price range. The direction of the breakout will determine the direction of a further near-term trend.
If the price consolidates below 6,3511 we will see a further downtrend. Alternatively, a break above 6,3930 will push the exchange rate higher.
