The tides are turning, and it looks like it may be to the benefit of China’s economy and related exchange traded fund (ETF).
Early economic indicators for the first quarter are expected to contain positive news with investment flows, demand, credit and loans all increasing, according to Yahoo! News. The hefty cash injection by the Chinese government seems to be working its course and the results are showing.
China is also cutting back on bond purchases with a drop in reserves of $32.6 billion in January, $1.4 billion more in February and a small rise of $41.7 billion in March, reports Keith Bradsher for The New York Times. In the first quarter, China’s foreign reserves grew $7.7 billion, whereas in the same quarter last year its reserves climbed $153.9 billion.
It is estimated that two-thirds of the Central Bank’s $1.95 trillion in foreign reserves are in U.S. securities. Chinese officials worry that American efforts to stir up its economy will result in inflation and devalue American bonds.
As stated on Fox Business yesterday, the Chinese yuan is doing well against foreign currencies and it looks like China may recover faster than its trade partners. A faster recovery could result in increased imports into China, but exports industry may rebound more slowly.
- iShares FTSE/Xinhua China 25 Index (FXI): up 9.5% year-to-date
- WisdomTree Dreyfus Chinese Yuan (CYB): up 2.4% year-to-date
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.