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The world’s second largest economy reported a growth rate of 6.8% in Q4 2015, within expectations and only marginally lower than 6.9% seen in the previous quarter. The  GDP deflator stood on -0.9%. This makes nominal GDP weak at 5.9%.

While this is still the lowest growth since 2009 in quarterly terms, the lowest annual growth since 1990 and the accuracy of the data is always doubted, markets are more cheerful and the Australian dollar is on a  recovery path after leaning lower after the initial dive.

In other releases, China reported industrial output of 5.9% instead of 6% expected and 6.2% last time. Fixed Asset Investment came out at 10%, slightly worse than 10.2% expected and  that was seen last time. Also retail sales showed an advance of 11.1%, again, slightly lower than 11.3% expected and 11.2% seen beforehand.

All in all, the trend is clear: the Chinese economy  is slowing down from the super-strong growth levels and all the figures are just a bit under expectations.

This seems to be China’s way of breaking the news of the big slowdown:  releasing data that is below expectations but not a disaster, a “damage control” way of doing things. Many fear the situation is much worse.


Reactions from analysts point to a loss of momentum in the Chinese economy, with weaker growth in Q4 than earlier in 2015. The  authorities in Beijing defend the credibility of the data and remain confident in China’s economic growth in the medium and long term.

They also referred to a great source of worry: the yuan  depreciation. This is not a trend and has a limited effect. It is important to note that the yuan devaluation has stopped, but this is also thanks to massive intervention from the authorities, using the mighty foreign exchange reserves.

They do admit that the international situation is complicated but do foresee stability. They point out that over 50% of tax revenue comes from the services sector, and this reflects the much needed transition from  manufacturing and investment to services and consumption.

AUD/USD Reaction

China is Australia’s No. 1 trade partner and many see the A$ as a proxy to trading China, even though the  Aussie has its own data to move on.

AUD/USD initiall dropped all the way to 0.6838, on the miss in the headline number. However, it began a winning streak since then, climbing and crossing the 0.69 level, with 0.6913 being the high at the time of writing.

AUDUSD January 19 2016 after Chinese GDP