Yuan Is Crashing After Huge China Trade Surprise

China’s overseas shipments held up (exports +11.1% YoY in USD terms) despite the stronger yuan and rising trade tensions with the U.S., but it was the imports that stunned many, rising 36.9% YoY in USD terms, slamming the trade surplus well below expectations.

In Yuan terms the spike in imports was just as impressive...

In USD terms, the China trade balance printed $20.34bn, well below the $54.65bn expectation and collapsing from last month.

Perhaps in an effort to show there is no trade war, January exports to U.S. rose 7.5%, but 'friendly' imports surged 20.5% on the year.

While coal (colder than normal) and oil imports (record) surged in January more than expected, it is crucial to understand that the Lunar New Year, which began earlier in 2017, may have distorted the data notably.

Nevertheless, stocks extended their losses on the data...

 

But the big impact is extending the losses from the US session in the Yuan as it crashes 5 handles after the data...

Offshore Yuan is now down over 11 handles on the day and down 1.5% in the last two days.

It would appear all bets are on again for another devaluation.

Today is actually the biggest drop in the Yuan since the Aug 2015 devaluation (and remember what ripples that sent through global markets)

Comments

JIMSJOE2 CJgipper Thu, 02/08/2018 - 05:07 Permalink

China's yuan was falling not because of the trade surplus but because of the basket of currencies that they use to peg the yuan to has been weakening. These include not only Asian trading partners but also the euro and the pound. The dollar was in the basket but was removed when the dollar was close to record highs. Recently the EUR/USD was at around the 126 handle and now close to 122 causing dollar strength. The GBP/USD was at around 142 and now down to the middle of 138. This all causes dollar strength and weakens the currencies in the basket.

      The author needs to take a course on ECON 101!

In reply to by CJgipper

not-me---it-wa… datbedank Thu, 02/08/2018 - 00:08 Permalink

pretty much the entire country closes for one week.

half a billion migrant workers ride the train home for

celebrations (all factories are closed), then ride back

a week later.

except for essential services, government offices close.

lots and lots and lots of shopping just before the

holiday.....sorta like heathen christmas!

supermarkets and department stores sell out,

markets are closed, the big cities with large immigrant

labor populations become deserted wastelands for

one week.

In reply to by datbedank

Laowei Gweilo datbedank Thu, 02/08/2018 - 01:30 Permalink

it mostly just applies to exports*, and the best way to look at it is as Early CNYs and Late CNYs, and not just YOY but monthly change in YOY

Early CNYs are usually up between DEC-JAN but down between JAN-FEB

Late CNYs are usually down between DEC-JAN but up between JAN-FEB

 

the logic is, the earlier CNYs brings all of the output surge into JAN and then shutdown in FEB ... so, then JAN is up from DEC, but FEB is down from JAN

but later CNYs you get more output surge in FEB and less shutdown lag FEB (instead of all in FEB as with early CNYs, with late CNYs it gets spread a little bit into MAR) ... so, then JAN is down from DEC because JAN misses out on some of the pre-CNY surge and then it's up between JAN and FEB because it gets more of the surge and less of the lag.

 

so why does this matter here?

2018 is a late CNY, so it was more than likely that the DEC to JAN change is usually underwhelming, and Feb YOY will likely be up from the JAN YOY

 

*(CNY 2012->2013 is a bit of an anomaly because 2012 was so early in JAN that both its JAN and FEB were affected by the shutdown, so that's why both in 2013 both JAN and FEB are up YOY and have little change between the two months).

*it affects the trade balance cuz exports but I think it mostly just affects exports cuz the factory shutdown. imports, I think, are more related to consumer spending, graft, and or whatever. e.g. there's more correlation to Xi Jingping policy than early or late CNY. 

 

In reply to by datbedank

Yen Cross khnum Wed, 02/07/2018 - 23:44 Permalink

Let me suggest an idea. Why is the euro being sold during the Hong Kong- Shanghai session for the last two weeks?

  Why is the usd/cny fix moving higher by about 75 pips the last several days?

 Ching Dong , wants stronger Yuan because Chink/euro trade is unwinding.

 Have fun on that boat Chink Dong/

In reply to by khnum

khnum Yen Cross Wed, 02/07/2018 - 23:57 Permalink

My source is Mc Kinsey and CO who claim that by 2022 76 per cent of Chinese will be considered middle class and as for China and where its headed im only refering to the opinion of a friend who runs a fortune 500 company for Asia fullstop,but your right Im no great economics expert actually I consider it a pseudo science that makes astrology respectable.By zombie I mean central bank intervention years in the wilderness etc perhaps you misunderstood.

In reply to by Yen Cross

Yen Cross khnum Thu, 02/08/2018 - 00:37 Permalink

PBoC devaluations, and massive Round Eye credit spending.

 I know exactly who you are. I'm flattered/   The simple facts are/is that the PBoC has been shorting the $usd to support internal purchasing power in China.

 The PBoC wants financial stability.

 The PBoC has used the euro as a hedge against the $usd, while making European exports cheaper in China.

  Same as it ever was, some people are getting a bit perturbed/

  Trust me when I say this/ If China offloads treasuries, there's plenty of buyers.

  If you want to play with the Dragon???  Float the Yuan

In reply to by khnum

Yen Cross khnum Thu, 02/08/2018 - 00:43 Permalink

Float the Yuan, and quit adjusting the "trading band".

China should unload all the U.S. Treasuries it owns.

  That is all.

 If China wants to be recognized as a world leader, the leaders of China should be prepared for the ramifications of their actions.

In reply to by khnum

dealaddict Yen Cross Thu, 02/08/2018 - 01:46 Permalink

Hi, I am a beginner and may not understand all the terms.  The article says people expect Chinese Yuan will devalue, but it seems you believe the opposite, am I correct?  The reason I ask is that I am betting gold value will rise, and gold has an inverted relationship with USD.  I am trying to see if things has changed.  Thanks.

In reply to by Yen Cross

Anonymous (not verified) Wed, 02/07/2018 - 23:58 Permalink

"Ching chang chong ..."

"What did you say?"

"CHING CHANG CHONG!"

(yes - I had an interview with a dude from China yesterday ... he sort of spoke English ... sort of ...)

But yeah - that CHINESE ECONOMY ... looks like as much a steaming pile of shit as us ... 

Anonymous (not verified) Wed, 02/07/2018 - 23:59 Permalink

Remember the 1980's when the dumbasses were telling us "Japan will take over the world"?

(Pepperidge Farms remembers ...)

No - China is not taking over the world ...

Also - "taking over the world" is a lame ass use of resources ...

peterk Thu, 02/08/2018 - 00:09 Permalink

why the hell does zerohedge put up theses annoying innacurate  inverse (INV) charts.

that is amateur hour

 

just use the proper chart tyler

karenm Thu, 02/08/2018 - 00:44 Permalink

Govt stats, here's how to interpret them. 

 

Know it's 100% Bull shit, just for starters. Next rule of thumb, if they say it's great, it bombed, and vice versa. 

 

"When it gets really bad, you have to lie."

Anonymous (not verified) Thu, 02/08/2018 - 01:27 Permalink

My quant is named Quan,

He used to mow my lawn,

He took some math,

Then he had a bath,

Now he has a condo in Bonn ...

zvzzt Thu, 02/08/2018 - 03:02 Permalink

you guys forgot to use the nano-second chart... Looks even more impressive on that one... 

july 2017 @ 6.90, sep 2017 @ 6.44, one day ago @ 6.25 and now up a bit

it is called a trend

Easyp Thu, 02/08/2018 - 03:17 Permalink

Interesting, when is the petro yuan arriving?  You know the currency backed by oil and gold that might replace the $?  In a way I hope it is launched because I think the $ has been weakened by QE.

bentaxle Easyp Thu, 02/08/2018 - 03:33 Permalink

The QE genie is never going back into the bottle. And China needs a softer currency than everywhere else anyway. 

Forget your oil/gold backing, unless you are first prepared for regime changes, replacement of banker controlled regimes, that is. This HAS to happen first. Then the new regime comes in....starts printing as well. Because ALL humans are fuckwits! 

In reply to by Easyp

napper Thu, 02/08/2018 - 03:34 Permalink

Using the moronic posts here as a contrarian indicator, perhaps it's time to watch out for a good swing trade opportunity on the way back up.

Davidduke2000 Thu, 02/08/2018 - 03:36 Permalink

When I hear the yuan crashed I laugh because when the yuan drops it make imports to China very expensive and that remedy the situation much quicker than a strong Yuan.