The International Monetary Fund (IMF) has intimated that the world is relying less on the American and British economies in its latest World Economic Outlook, suggesting a shift towards China and Japan.

While the US Dollar fell to its lowest point in the last 14 months, due in no small part to the collapse of President Trump's efforts to overhaul healthcare in the US, IMF estimates impressive growth of 6.7% for the Chinese economy this year, with a further 6.4% growth in 2018.

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The IMF said in its report: "Rich market valuations and very low volatility in an environment of high policy uncertainty raise the likelihood of a market correction, which could dampen growth and confidence," whilst citing China's credit growth and protectionist policies as potential risks.

The resurgence of the Chinese yuan appears to be directly linked to the state of the American dollar, which gives those trading and looking at indices across Asia and Oceania an opportunity to take a favorable position on the CHY/USD currency pair in the forex markets.


(Photo : Jim Makos)

 

During his campaign for presidency, Donald Trump used the yuan as a campaign issue, complaining that China was deliberately weakening its currency, but the Republican's instability is now appearing to strengthen the yuan further. Analysts at Credit Suisse said last week: "Just looking at a chart of the pair might lead one to think that the yuan is on a tear and that something new is going on in China.

"In contrast, we view the fall in the dollar/yuan pair as all about broad dollar weakness."

The weakening dollar doesn't appear to be the only mitigating factor in the strengthening of the yuan either, with its own economic drivers underpinning the current financial stability in China.

Patrick Bennett of CIBC claims last month's encouraging trade report demonstrates growth in both Chinese exports and imports.


(Photo : Boxun Zhang)

"This was yet another strong result for an economy that conventional wisdom has believed cannot surely sustain the pace of growth and therefore is susceptible to crumble," said Bennett. "That has not occurred and we don't see that happening at present or anytime soon."

In addition, China's small and medium-sized enterprises (SMEs) grew in confidence this month, as did sentiment among steel traders and producers.

In total, some 19 provincial regions across China outpaced the national growth rate, according to data from the National Bureau of Statistics, with a dozen regions reaching GDP beyond one trillion yuan in H1 2017.

Whether this buoyancy will appease those financial investors wary of a potential crash in China remains to be seen, with the confidence of global finance professionals waning slightly despite these figures.

A recent survey of the China Economic Panel demonstrated that expectations for the yuan in the next 12 months had fallen from 9.7 to minus 4.1 in June.

Michael Schroder, senior researcher, Centre for European Economic Research (ZEW), said: "These frequent fluctuations seen within a relatively short period of time are a clear indication of uncertainty among the experts in terms of their assessment of future growth in China."