http://www.theforexnittygritty.com/forex/slower-chinese-economic-growth-and-a-cheaper-yuan Slower Chinese Economic Growth and a Cheaper Yuan The Chinese Yuan has fallen versus the US dollar for four months in a row. This is the Chinese currency’s worst performance since 2007. For Forex traders this has to do with slower Chinese growth and a cheaper Yuan, now and in months to come. The government / People’s Bank of China are trying to avoid an economic hard landing in a country that has been the envy of the developing world for decades. There is still the risk of a Chinese real estate crash due to a grossly inflated housing bubble. Credit has been way too easy, especially for those with Communist connections in the land of state run capitalism. With slower Chinese growth and a cheaper Yuan for some time to come how should a Forex trader react? As usual fundamental analysis and attention to technical details are important. And, as always never trade what you do not understand. Those admonitions having been made, here are a few Forex thoughts about slower Chinese economic growth and a cheaper Yuan. What Goes Around Comes Around The USA was stuck in an inflationary slide throughout the 1970’s largely due to excess spending in the Vietnam War coupled with vastly expanded social programs. Common thinking was that the day of the USA was past and Japan was set to take over the economic world. Then the Regan administration took Milton Friedman’s advice and jacked interest rates up. This inaugurated one of the longest American economic expansions ever. Japan did seem ready to take over the world by the late 1980’s until a soft underbelly of hidden loans lead to two decades of deflation from which the nation is just now recovering. Then comes China with its vast cheap labor pool and a billion person market for Western products. Investment flourishes and everyone needs to manufacture in China using Japanese management techniques and German engineering. The internet provides retailers with immediate sales data and orders are wired to China to efficiently take advantage of hot sales items. Unfortunately many Western companies also outsource their expertise and find that they have a front office and design shop but little else in the supply chain. North America and Europe become huge and lucrative markets for Chinese products. A cheap Yuan is part of the picture as China manipulates interest rates and buys US treasuries to the tune of a trillion or so. And then the 2008 recession hits and orders to Chinese factories from North America and Europe decrease. And manufacturing starts to move back to the USA, Germany, France, etc. China needs to sell internally and has not yet accomplished that goal. In the meantime we are seeing slower Chinese economic growth and a cheaper Yuan. Trading Opportunities Where are slower Chinese growth and a cheaper Yuan going? Most experts expect to see continued shrinking of Chinese growth.

1. Slower Chinese Growth
and a Cheaper Yuan

2. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
The Chinese Yuan has fallen versus
the US dollar for four months in a row.

3. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
This is the Chinese currency’s worst
performance since 2007.

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5. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
For Forex traders this has to do with
slower Chinese growth and a cheaper
Yuan, now and in months to come.

6. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
The government / People’s Bank of
China are trying to avoid an economic
hard landing in a country that has been
the envy of the developing world for
decades.

7. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
There is still the risk of a Chinese real
estate crash due to a grossly inflated
housing bubble.

8. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Credit has been way too easy,
especially for those with Communist
connections in the land of state run
capitalism.

9. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
With slower Chinese growth and a
cheaper Yuan for some time to come
how should a Forex trader react?

10. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
As usual fundamental analysis and
attention to technical details are
important.

11. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
And, as always never trade what you
do not understand.

12. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Those admonitions having been made,
here are a few Forex thoughts about
slower Chinese economic growth and a
cheaper Yuan.

13. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
What Goes Around
Comes Around

14. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
The USA was stuck in an inflationary
slide throughout the 1970’s largely due
to excess spending in the Vietnam War
coupled with vastly expanded social
programs.

15. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Common thinking was that the day of
the USA was past and Japan was set
to take over the economic world.

16. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Then the Regan administration took
Milton Friedman’s advice and jacked
interest rates up.

17. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
This inaugurated one of the longest
American economic expansions ever.

18. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Japan did seem ready to take over the
world by the late 1980’s until a soft
underbelly of hidden loans lead to two
decades of deflation from which the
nation is just now recovering.

19. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Then comes China with its vast cheap
labor pool and a billion person market
for Western products.

20. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Investment flourishes and everyone
needs to manufacture in China using
Japanese management techniques and
German engineering.

21. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
The internet provides retailers with
immediate sales data and orders are
wired to China to efficiently take
advantage of hot sales items.

22. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Unfortunately many Western
companies also outsource their
expertise and find that they have a front
office and design shop but little else in
the supply chain.

23. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
North America and Europe become
huge and lucrative markets for Chinese
products.

24. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
A cheap Yuan is part of the picture as
China manipulates interest rates and
buys US treasuries to the tune of a
trillion or so.

25. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
And then the 2008 recession hits and
orders to Chinese factories from North
America and Europe decrease.

26. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
And manufacturing starts to move back
to the USA, Germany, France, etc.

27. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
China needs to sell internally and has
not yet accomplished that goal.

28. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
In the meantime we are seeing slower
Chinese economic growth and a
cheaper Yuan.

29. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Trading Opportunities

30. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Where are slower Chinese growth and
a cheaper Yuan going?

31. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Most experts expect to see continued
shrinking of Chinese growth.

32. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
The nation’s economy is still expanding
but in all likelihood Chinese growth will
eventually look like what we see in
Japan, North America and Europe.

33. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
What goes around comes around and
China cannot run a huge trade excess
with the rest of the world forever.

34. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Other nations will not put up with that
and other factors apply as well.

35. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
China’s one couple one child policy has
left China with an aging population and
therefore fewer young and cheap
workers.

36. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
The Yuan is falling and is unlikely to
rebound soon.

37. http://www.theforexnittygritty.com/forex/slower-
chinese-economic-growth-and-a-cheaper-yuan
Traders may which to use Forex
options in this regard in order to contain
risk and leverage their trades.