China’s central bank PBOC unexpectedly depreciated CNY by 4.4% within three days in August and then stabilised with PBOC intervention. We forecast that USD/ CNY stands at 6.6 and 6.8 by end- 2015/2016. We firmly believe we are moving from “Nothing is possible in CNY’s rigidity” to “everything is possible to reflect the decelerated economy”.
Amundi Hong Kong Chief Economist
The RMB (onshore) has depreciated by 1.6% vs. USD ytd. (-5.8% since August 10th, the day before the announcement of the RMB devaluation). It is however interesting to note that while the trade-weighted USD has continued to appreciate since August 10th (+4%), the trade-weighted RMB has depreciated (-2%).
Head of Macroeconomic Research
China is currently undergoing profound change: its growth model based on investment and credit is running out of steam and has produced vulnerabilities such that continuing down this path would only increase the risk of a hard landing. The Chinese authorities are therefore faced with the need to shift to a growth model that is more sustainable in the medium to long term and increasingly focused on domestic demand (and on household consumption in particular).
Nicolas DOISY, Karine HERVE