Wednesday, August 7, 2013

The Rising Yuan And Slowing Chinese Growth

Above is a weekly chart of the yuan ETF over a three year period.  In the 2H09 and most of 2010 we see a relative level of stability, save for the quick rally in 3Q10.  However, starting in 2011, continuing into 2012 and on through this year we see a continual and gradual increase in the yuan's overall value.  While the overall rise is only about 6%, the overall trend is very clear: it's moving up.  And with it, we see a decrease in Chinese growth as shown in this chart:

In 2Q10 the annual rate of GDP growth printed at 11.9% .  But since then the overall rate of growth has been decreasing, finally falling to a 7.4%-7.9% clip over the last few quarters. 

In reality, there are a lot of reasons for China's slowdown.  But massive exports were central to China's overall growth, exports which are now more expensive thanks to the yuan's appreciation.