Whilst the opaqueness of the Chinese GDP numbers is well known, it doesn’t help when the currency is devalued.
Indeed, this is surely a step that no government would choose to make when they are trying to rebalance the economy in favour of domestic consumption, as it makes the purchasing power of the Chinese consumer weaker.
It also sends a message to the west that all may not be well under the bonnet despite all the polishing that goes on.
This is why commodities took a further lurch down and other exporting nations such as Brazil, India and Asia-Pacific nations saw their stock markets affected as Chinese exports have just become around 5% cheaper to the developed economies.
Dose of Asian Flu
For China, cheaper exports means less inflation in the west and therefore a reduced possibility that interest rates will rise, which is a good thing. Commodity prices and oil prices look like they will be staying very subdued until well into next year, which is always positive in terms of business costs.
The consumer is experiencing some wage growth as well as lower fuel costs along with a buoyant property market at rock bottom interest rates, which are unlikely to rise by much even when interest rates start moving up. So the domestic sectors look set fair.
It used to be said that when America sneezes the rest of the world catches a cold. With China adjusting its currency, for whatever reason, all eyes will be on future economic data releases to see whether there is a dose of Asian Flu ahead.
