Chinese stocks are looking for support with inflation data due to the country.
Last month’s number was 1.8% and is expected to rise to 2.1% as the economy continues to see consumers boosted by the country’s reopening.
CHI 50 - Daily Chart
The critical level in the CHI 50 index is at 13,300, where we saw mid-December highs.
The Fitch rating agency had a more robust outlook for China’s economy with an upgraded forecast for growth at 5% in 2023, which was up from the 4.1% prediction made previously.
The UBS investment bank also estimated that China’s households have total excess savings of around 4-4.6 trillion yuan ($590 billion to $678 billion).
The upward revision from Fitch is based on “evidence that consumption and activity are recovering faster than initially anticipated” after China’s government removed most of its covid restrictions.
Fitch also pointed to the latest purchasing managers’ index (PMI) for manufacturing and services in China, indicating further business activity growth. China’s manufacturing PMI rose to 50.1 in January from a previous reading of 47, and its services PMI rose to 54.4, the highest level since June 2022. Values above 50 indicate an expansion of activity, while lessons under 50 show a contraction.
Xi Xinping was talking recently at his first policy speech when he said: “Chinese-style modernisation breaks the myth of ‘modernization equals Westernisation’.”
“Chinese-style modernisation has set a good example for developing countries to move towards modernising independently and provided them with a new choice,” he added.
Chinese stocks have dipped recently, and the recent diplomatic spat over the Chinese “weather balloon” may slow the rush of investment capital from overseas companies into the mainland on fears of strained relations.