China’s Politburo sets out economic priorities for second half of 2024
China’s Politburo, the country’s top leadership, held a meeting on Tuesday to study the current economic situation, laying out economic priorities for the second half of 2024, the country’s state media reported.
Key takeaways
Unfavorable impacts from changes in external environment are increasing.
Domestic effective demand remains insufficient.
There are still many risks and hidden dangers in key areas.
These are issues in development and transformation.
Macroeconomic policies should continue to be more vigorous and more forceful.
It is necessary to strengthen counter-cyclical adjustments, implement a proactive ficscal policy and prudent monetary policy.
Should speed up the implementation of the identified policy measures.
Should reserve and launch a number of incremental policy measures as soon as possible.
It is necessary to focus on boosting consumption to expand domestic demand.
It is necessary to speed up the issuance and use of special funds, make good use of ultra long-term special treasury bonds.
Should increase residents' income through multiple channels, enhance the consumption ability and willingness of low- and middle-income groups.
It is necessary to cultivate and expand emerging industries and future industries.
It is necessary to comprehensively use a variety of monetary policy tools.
It is necessary to increase financial support for the real economy, and promote a steady decline in the cost of comprehensive social financing.
It is necessary to maintain the basic stability of the Renminbi exchange rate at a reasonable and balanced level.
Will launch a new round of pilot measures to expand the opening up of the service industry, so as to promote the use of foreign capital for stability.
It is necessary to actively cultivate new momentum for the development of foreign trade.
Will create conditions to accelerate the resolution of debt risks of local financing platforms.
It is necessary to strengthen the employment priority policy and do a good job in the employment of key groups such as college graduates.
Market reaction
The Australian Dollar is holding the latest upside following these Chinese headlines, with AUD/USD adding 0.11% on the day to trade near 0.6555, as of writing.
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.
