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The tightly controlled yuan has weakened to its lowest level in 16 months while China’s blue-chip stock slipped, and has lost 4.1% so far this year. The currency has had a rocky ride, with two weeks to go until Donald Trump becomes US president. He has threatened big US tariffs on Chinese imports.
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Chinese authorities have introduced a number of measures to support the yuan, such as swap and relending schemes totalling 800 billion yuan to shore up investor confidence. The threat of US tariffs along with worries about China’s sluggish economic recovery have triggered capital outflows.
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The People’s Bank of China could issue more yuan bills in Hong Kong, state-owned news outlet Yicai reported on Monday. Financial News, a central bank publication, said the PBOC has the tools and the experience to respond to the currency’s depreciation.
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Charu Chanana, chief investment strategist at Denmark’s Saxo Bank, said:
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The decision to allow the yuan to weaken last week has heightened concerns about capital outflows, further dampening investor sentiment.
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Preventing a sharp decline of the yuan will be crucial for China’s recovery. Any tactical recovery this year will need more than just stimulus measures, particularly whether China can negotiate a deal with president-elect Trump.
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The Shanghai and Shenzhen stock exchanges have held meetings with foreign investors, to assure them they would continue to open up China’s capital markets, the two bourses said on Sunday night.
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shop at the Russian goods market in Shanghai, China, December 29, 2024.”,”caption”:”People shop at the Russian goods market in Shanghai, China December 29, 2024. “,”credit”:”Photo: Costfoto/NurPhoto/REX/Shutterstock”}}],”attributes”:{“pinned”:false,”keyEvent”:true,”summary”:false},”blockCreatedOn”:1736150803000,”blockCreatedOnDisplay”:”03.06 EST”,”blockLastUpdated”:1736151752000,”blockLastUpdatedDisplay”: “03.22 EST”,”blockFirstPublished”:1736151752000,”blockFirstPublishedDisplay”:”03.22 EST”,”blockFirstPublishedDisplayNoTimezone”:”03.22″,”title”:”Chinese exchanges meet with foreign investors as yuan falls to 16-month low “,”contributors”:[],”primaryDateLine”:”Monday 6 January 2025 03.22 EST”,”SecondaryDateLine”:”First published Monday 6 January 2025 02.53 EST”},{“id”:”677b7f488f0856c711c8aecc”,”elements”:[{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
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Confidence among British businesses has plummeted to the lowest levels since ex-prime minister Liz Truss’s mini-budget in September 2022 following the autumn budget’s large tax increases.
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A survey of nearly 5,000 firms from the British Chambers of Commerce showed concerns over taxation were the highest since 2017, while confidence about sales over the next 12 months was the lowest since late 2022.
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The BCC’s director general Shevaun Haviland said:
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The worrying reverberations of the budget are clear to see in our survey data. Businesses confidence has slumped in a pressure cooker of rising costs and taxes.
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The chancellor, Rachel Reeves, announced £40bn of tax rises on 30 October, with a big burden on businesses, who will have to pay higher social security charges from April, along with a higher national minimum wage.
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While the Bank of England estimates that higher public spending will temporarily boost growth next year, the tax rises are also expected to push up inflation slightly.
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The BCC said 55% of firms plan to raise prices, up from 39% the quarter before, while 24% intend to scale back investment, up from 18% previously.
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Growth in the UK economy picked up in the first half of 2024 as it recovered from a shallow recession in late 2023, but flatlined in the third quarter. The Bank of England has forecast zero growth for the fourth quarter, and an expansion of 1.5% in 2025.
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In China, services growth has risen to a seven-month peak, according to a closely-watched survey.
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The Caixin purchasing managers’ index (PMI) rose to 52.2 in December from 51.5 in November, signalling the strongest growth in the service sector since May, as new orders accelerated, despite a fresh fall in exports. Confidence remained upbeat despite higher cost pressures.
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However, authorities are struggling to prop up the yuan, which has fallen to a 16-year low amid concerns about the economy and US tariffs.
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Chinese stocks slipped on Monday, with the benchmark CSI 300 index down by 0.16%, as the country’s two biggest stock exchanges said they met foreign investors over the weekend.
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The Shanghai and Shenzhen stock exchanges both held weekend symposiums with foreign investors “to solicit opinions and suggestions on the recent A-share market situation,” referring to shares from companies in mainland China that trade on the two stock exchanges.
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The Shenzhen Composite index fell by nearly 0.4% on Monday, while the SSE Composite (stocks that are traded at the Shanghai Stock Exchange) edged 0.14% lower.
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The South Korean Kospi led gains in Asia, rising by 2.3%, despite political turmoil in the country. Police will consider arresting members of the presidential security service if they try to block investigators, in an attempt to execute an arrest warrant for impeached president Yoon Suk Yeol, according to the Yonhap news agency and Reuters.
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The Agenda
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9am GMT: Eurozone HCOB PMI composite and services final for December
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1pm GMT: Germany inflation for December
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2.45pm GMT: US S&P Global composite and services PMIs final for December
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3pm GMT: US Factory Orders for November
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main events
The yuan falls to a 16-month low. Chinese exchange meets foreign investors
Learn more about China.
The tightly controlled yuan has fallen to a 16-month low, while Chinese blue-chip stocks have fallen, down 4.1% since the start of the year. With only two weeks left until Donald Trump's inauguration as US president, currency markets are in a volatile situation. He threatened that the United States would impose massive tariffs on imports from China.
Chinese authorities have introduced a number of measures to support the renminbi, including a swap and re-lending facility totaling 800 billion yuan to boost investor confidence. The threat of U.S. tariffs and concerns about China's slowing economic recovery are driving capital outflows.
The People's Bank of China may issue more renminbi banknotes in Hong Kong, state news agency Yi Cai reported on Monday. Central bank publication Financial News said the People's Bank has the means and experience to respond to currency depreciation.
Charu Chananasaid the chief investment strategist at Denmark's Saxo Bank.
Last week's decision to allow a weaker yuan heightened concerns about capital outflows, further deteriorating investor sentiment.
Preventing the renminbi from plummeting is extremely important for China's economic recovery. A tactical recovery this year will require more than just economic stimulus, especially whether China can negotiate a deal with President-elect Trump.
The Shanghai and Shenzhen stock exchanges held meetings with foreign investors to ensure the continued opening of China's capital markets, the two stock exchanges announced on Sunday night.
Introduction: More than half of UK businesses plan to increase prices as confidence falls to two-year low, survey finds
good morning. Welcome to our regular coverage of business, financial markets and the global economy.
Confidence in British businesses has plummeted to its lowest level since former chancellor Liz Truss set out her mini-budget in September 2022, following a major tax hike in the autumn budget.
A British Chambers of Commerce survey of almost 5,000 businesses showed that concerns about taxation were the highest since 2017, while confidence in sales over the next 12 months was the lowest since the end of 2022. .
Executive Director of BCC shevan havilland Said:
The worrying impact of the budget is also evident in our survey data. Business confidence has slumped due to the pressure cooker of rising costs and taxes.
The prime minister is rachel reevesannounced a £40bn tax increase on October 30th, putting a huge burden on businesses who will have to pay a rise in social security payments from April, along with an increase in the national minimum wage.
The Bank of England expects higher public spending to provide a temporary boost to growth next year, but it also expects tax increases to lift inflation slightly.
According to the BCC, 55% of companies plan to raise prices, up from 39% in the previous quarter, and 24% intend to reduce investment, up from 18% in the previous quarter.
Growth in the UK economy recovered from a shallow recession in late 2023, accelerated in the first half of 2024, but leveled off in the third quarter. The Bank of England forecasts zero growth in the fourth quarter and 1.5% growth in 2025.
Growth in services in China has reached a seven-month peak, according to a closely watched study.
The Caixin Purchasing Managers' Index (PMI) rose to 52.2 in December from 51.5 in November, with new orders accelerating despite a fresh decline in exports, supporting the strongest growth in the services sector since May. Showed. Confidence remains positive despite rising cost pressures.
But authorities are struggling to prop up the yuan, which has fallen to a 16-year low on concerns about the economy and U.S. tariffs.
Chinese stocks fell on Monday, with the benchmark CSI300 index down 0.16% after China's two major stock exchanges said they held meetings with foreign investors over the weekend.
The Shanghai and Shenzhen stock exchanges held a symposium for foreign investors over the weekend to provide opinions and suggestions on the recent A-share market situation regarding the stocks of mainland Chinese companies traded on the two stock exchanges. “We have solicited the following.”
On Monday, the Shenzhen Composite Index fell nearly 0.4%, while the SSE Composite Index (stocks traded on the Shanghai Stock Exchange) fell 0.14%.
South Korea's Kospi led gains in Asia, rising 2.3% despite domestic political turmoil. Police will consider arresting members of the Presidential Security Service if they attempt to obstruct investigators in order to execute an arrest warrant against the impeached president. Yoon Seok YeolYonhap News and Reuters reported.
agenda
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9am (GMT): Eurozone HCOB PMI Composite and Services Final for December
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1pm GMT: Germany's December inflation rate
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2:45pm GMT: US S&P Global Composite and Services PMI December Final.
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3pm GMT: US factory orders for November.
