China Macro Monitor Walking the Tightrope Between Reform and Stimulus
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Walking the Tightrope Between Reform and Stimulus
This quarterly report focuses on macro developments in China relevant to investors across asset classes and markets.
• The Chinese authorities are walking a tightrope between maintaining enough stimulus to avoid the equity market rout worsening and sticking to a reform agenda that demonstrates to the international community that China is liberalising and developing its markets. We believe that a clearly communicated path for removal of support measures could help offset taper tantrums.
• Outside of the equity markets, China continues to pursue its reform programme. China has announced the widening of it currency trading band and has come clean about its official gold holdings after six years of silence on the issue. We believe both actions are motivated by its drive to gain reserve currency status, with its hopes of getting the Renminbi into the accolade of the IMF’s Special Drawing Rights basket this year.
• The Chinese property markets are starting to show the beginnings of a recovery. First tier city prices are now rising as constrained new building and a pickup in sales has helped tighten the supply-demand balance.
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