Ongoing reforms, notably from the supply side, could further support Chinese economic growth. Reforms have bolstered industrial profitability and strengthened commodity prices. China’s exporters are also enjoying improvements from a rebound in global trade.
The Chinese economy is also shifting towards domestic-oriented consumption as a main growth driver. Consequently, consumption-driven sectors liek technology and services are becoming a growing component in the economy.
“But PBOC rate moves don’t follow a regular schedule and the timing, just hours after the US Fed tightened, suggests policymakers may also have hoped the move could help stabilise the renminbi. In the event, the dollar has weakened against most major currencies today, but the PBOC’s caution is understandable. Capital outflows have tended to increase when the renminbi has weakened against the US currency,” according to a Capital Economics note posted by Dimitra DeFotis of Barron’s.
FXI, the largest China ETF trading in the U.S., is up nearly 12% year-to-date.
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