Chinese Yuan Flat Despite Monster Q1 GDP, Retail Sales Data

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The Chinese yuan is trading relatively flat against its US peer to finish the trading week, despite the monster economic numbers coming out of Beijing. The yuan, which has erased most of its 2021 gains this year, has struggled to generate momentum amid monetary policy concerns. But as the economic recovery accelerates, the yuan might renew its ascent.

According to the National Bureau of Statistics (NBS), the gross domestic product (GDP) exploded 18.3% year-over-year in the first quarter. This fell short of the market forecast of 19%. On a quarterly basis, the Q1 GDP advanced at a smaller-than-expected pace of 0.6%.

Overall, this was the strongest economic expansion for China on record.

In March, retail sales spiked at an annualized rate of 34.2%, beating the median estimate of 28%. China’s retail trade, ballooning at the best level since January 1995, was stimulated by apparel, cosmetics, furniture, automobiles, building materials, and oil.

Last month, industrial production increased 14.1% year-over-year, falling short of the 17.2% projection. Industrial capacity utilization slipped to 77.2% in the January-to-March period. Housing prices rose 4.6% year-over-year in March. The unemployment rate ticked lower to 5.3% in March.

Fixed asset investment soared 25.6% year-to-date, higher than the consensus of 25%. Foreign direct investment (FDI) surged 39.9% year-over-year in March.

Earlier this week, the government reported that China’s trade surplus narrowed from $20 billion in February to $13.8 billion in March. Exports increased by 30.6%, and imports expanded to an all-time high of 38.1%.

The People’s Bank of China (PBoC) also reported that gold imports totaled $8.5 billion in March, coming in a higher at $600 million the same time a year ago. In the previous year, the central bank reported that gold purchases topped $3 billion on a monthly basis, suggesting that Beijing could be lifting restrictions again. Moreover, the PBoC confirmed that it injected $23 billion into the financial system this week with its medium-term lending facility to ensure ample liquidity heading into the weekend. There was little reaction in the money markets.

The USD/CNY currency pair slid 0.03% to 6.5209, from an opening of 6.5228, at 17:27 GMT on Friday. The EUR/CNY jumped 0.08% to 7.8130, from an opening of 7.8049.

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