China’s Bullish GDP Growth Stabilizes Yuan

The first quarter data of China has come out after a solid positive gain causing a slow down in capital outflows to stabilize the currency following a selloff last year. They are optimistic to attain the 6.5 percent GDP growth for this year as mentioned by the Finance minister Xiao Jie. This is a good signal indicating the strengthening of yuan and capital flows are gaining back by the country.

The interest rates are moving in an upward direction despite tighter policies to curb the fast growth of credit hampering the economic progress. Yet, economic growth advanced faster-than-expected 6.9 percent in the first quarter, weakening capital outflows and more stable cross-border flows have strengthened yuan substantially. This has then eased the pressure regards to Foreign exchange reserves as it retreated with the surge of the greenback.

However, further tightening cannot be ruled out as it may change again abruptly especially when the currency come again under pressure with the global appreciation of the U.S. dollar.