Chinese Yuan: Slow appreciation with weak demand – Commerzbank

Commerzbank's Volkmar Baur observes that China's economic growth remains export-focused due to weak domestic demand and a slowdown in investment and retail sales. While a growing trade surplus bolsters the Chinese yuan, he predicts only modest further appreciation due to the country's ongoing economic challenges. Investment in China dropped by 7.2% year-over-year in the first eight months of the year, with new construction starts declining by over 30% year-over-year and infrastructure and manufacturing sectors also experiencing declines.

Retail sales grew by just 0.4% year-over-year, with real sales falling by 0.4% after accounting for inflation. China's robust trade surplus supports the economy and the yuan, but the yuan's appreciation against the US dollar has slowed to around 0.5% per month. Given the persisting weakness in China's domestic economy, Commerzbank anticipates a gradual appreciation of the yuan against the US dollar for the rest of the year.