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Population Decline Report Garners Attention


Offshore yuan is weaker, USD/CNH rising towards the top of yesterday's range, last at 6.4848, up 45 pips.

  • There was a report in the China Securities Journal that the yuan FX rate is more likely to see two-way moves this year. The PBOC seems to have loosened its asymmetric bias for the yuan, since the return from LNY (48 sessions) the sum of USD/CNY sell side estimates minus PBOC fixes is -58 pips, compared to 465 pips in the 48 sessions pre-LNY. Earlier this week China's SAFE said the forex market would remain stable with a solid foundation.
  • Fig.1: USD/CNH & Fix Delta

Source: MNI/Bloomberg

  • Asian Development Bank (ADB) released a report today that forecasted China's GDP to surge this year despite persistent uncertainties over the coronavirus disease (COVID-19) pandemic.
  • A story in the FT said that China is set to report its first population decline since the People's Republic was founded in 1949. This could have significant implications for China's economy, a Capital Economics note posits that a shrinking population could pose headwinds that mean China never overtakes the US as the world's biggest economy, while as the population ages extra strain could be put on the pension system which is already underfunded. A PBOC report in March estimated that China's potential growth could be 5.1% in 2025, from around 5.7% in 2021.
  • Elsewhere, leaders from Germany and China will hold virtual talks today. China's foreign minister Wang said both sides should work deepen practical cooperation after agreeing to advance investment last year.

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