China is the second largest
economy in the world with a GDP of more than $11 billion. It is also the most
important economy in the world from a demand and supply perspective. This is
because it buys most of the world’s important goods like crude oil and iron
ore. On a supply side, it supplies the world with most of the products it
needs. For example, while the iPhone is an American company, it is assembled by
a Chinese company. The same is true with other popular products made by
companies like Nike, Adidas and Under Armor. China is also important because it
is forecasted to be the biggest economy in the world in a few years.
Therefore, the Chinese economy
provides an important barometer on how the world’s economy is doing. When the
country’s data weakens, it tends to send shockwaves to the market.
Today, the country released the
first reading of the first quarter performance. In the quarter, the economy
expanded by 6.4%, topping the analysts forecasts of 6.3%. Nonetheless, it was
unchanged from the fourth quarter’s performance. On a MoM basis, the economy
expanded by 1.4%, which was in line with the expectations. It was lower than
the previous growth of 1.5%. Today’s data showed that things are not as bad as
investors were expecting.
In addition to the positive GDP
numbers, the country’s unemployment rate declined to 5.2% from the previous 5.3%.
The unemployment rate is an important number that shows the percentage of
working-age residents who are out of work for economic reasons. This year, the
unemployment rate remains higher than last year’s average of below 5.0%.
Another positive number was the
industrial production. In March, the production rose by 8.5%, which was higher
than the expected 5.6%. It was also higher than the previous 5.3%. It was the
fastest growth since 2015. The retail sales rose by 8.7%, which was higher than
the expected 8.3%. It was the fastest growth since December last year.
These numbers show that the fears
that the country’s economy is slowing have been overstated. It also means that
the economy could have bottomed. However, data from China should be taken with
a grain of salt. This is because the country is like a dictatorship, with a
president who is very powerful. There are very few checks and balances. This
means that the data could be manipulated, especially at a time when the country
is negotiating a trade deal with the US.
In response to the data, the
Australian dollar and Chinese yuan gained. Chinese stocks were mixed, with the
Shanghai index gaining by less than 10 basis points. China A50 declined by 76.
The price of crude oil jumped, with Brent gaining by 0.25%. The chart below
shows the reaction of the Aussie.
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