FX Research – China trip note

v I met couple of my old contacts over my week long stay in China. There was not one meeting that Chinese renminbi (RMB) was not part of the discussion. I was fortunate that my visit coincided with the start of National People’s Congress meeting on 5 March.

v I have the impression that Chinese authorities could opt for an aggressive easing on its current policy standing. Activity in the first two months indicate public investment is strengthening and focus of macro policies is now shifting back to demand side stimulus after few months of talk about supply side reforms.

v Property prices are surging in major cities but the destocking process in the Tier 3 and Tier 4 cities is still slow.

  

v RMB’s start-stop devaluation has further to run along with a combination of further easing of foreign reserves and capital controls tightening but it may see a cyclical upswing fuelled by credit surge and expansionary macro policies.