China’s NBS: Economy grew steadily in face of pressure
Following the publication of the high-impact China’s April activity data, the National Bureau of Statistics (NBS) expressed its outlook on the economy during its press conference on Monday.
Key quotes (via Reuters)
- Productivity demand grew steadily.
- Employment situation generally stable.
- Economy grew steadily in face of pressure, continues developing in an upward trend.
- China actively diversifying, expanding trade with Belt and Road initiative nations.
- But there are many favorable conditions for sustained economic recovery.
- Although external impact increased in April, the trend of economic recovery did not change.
- Gradual implementation of policies will be conducive to the sustained recovery and improvement of the economy.
- As the effect of policies continues to show, contribution from consumption to economic growth will continue to increase.
- We need to recognize that the internal driving force for investment growth is ‘obviously insufficient’.
- We need to improve the efficiency of investment and continue to optimize the structure of investment.
- Foreign trade overcame difficulties and maintained steady growth in April, demonstrated strong resilience and international competitiveness.
- The reduction of tariffs by China and the United States in the next stage is conducive to the growth of bilateral trade and the recovery of the world economy.
- Against increased external shocks, China’s foreign trade has been able to withstand pressure and continue to grow.
- China has the conditions, ability and confidence to deal with various challenges.
- Necessary to see that the current overall low prices will increase the pressure on enterprises and affect the income growth of residents.
- Should continue to give full play to the role of macro policies and promote the reasonable recovery of prices.
- Next step is to continuously expand demand, optimize and adjust the industrial structure, and promote the producer prices to return to a reasonable range.
Market reaction
AUD/USD picks fresh bids to near 0.6420, adding 0.28% on the day, at the press time.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
