Don't Overthink China's Strengthening Yuan
Its economy is recovering and policy makers have avoided open-slather stimulus. This all makes sense, for now.
China may be the only major economy to notch growth at all in 2020, quite the reversal after the onset of Covid-19 triggered a historic collapse early in the year. This revival has been reflected in the yuan, Asia's best performing currency this quarter. There’s good reason to think it isn’t a fluke.
Bloomberg Economics projects China’s gross domestic product will grow 2% this year; the Organization for Economic Cooperation and Development last week raised its forecast to 1.8%. That’s miles ahead of the first quarter’s 6.8% plunge. Recent data suggest the bounce might have staying power: Exports and industrial production have chugged away over the past few months, while retail sales rose for the first time in August since the pandemic began.