China may implement additional economic stimulus Policies this year.

The Chinese yuan depreciated slightly after gaining over 1.1% previously, as the US dollar strengthened following the release of details about the trade policy of the new US president. In his inauguration speech, President Donald Trump proposed a 25% tariff on Mexico and Canada, along with stricter tariff measures on China. At the same time, the yuan has been supported by hopes for negotiations between China and the US, as Trump expressed interest in visiting China following his inauguration. Additionally, President Xi Jinping has urged policymakers to adopt economic policies that further stimulate domestic growth to sustain momentum.

Foreign direct investment (FDI) in China dropped by 27.1% in 2024, marking another slowdown after an 8% decline in 2023. This represents the sharpest FDI contraction since 2008 and reflects a rapid decrease in domestic consumption growth. It also highlights the continued decline in housing prices, deflation risks, and falling values of various financial assets since the previous year. Moreover, rising defaults among major corporations and opaque financial statements of manufacturers have eroded foreign investors’ confidence, leading to reduced investments in China.

China’s economy grew by 5% in 2024, in line with the government’s target of approximately 5%, but slightly down from 5.2% growth in 2023. This growth was driven by economic stimulus measures that were actively implemented starting in September to support domestic economic recovery, as well as consumer and corporate confidence. Furthermore, companies have expanded exports to counteract higher US tariffs, resulting in a 7.1% increase in exports. Manufacturing grew by 6.1%, led by equipment production and high-tech manufacturing, while the services sector grew by 5%. Looking ahead to 2025, investors predict the Chinese government will maintain its growth target at around 5% for the third consecutive year.

China’s population decreased by 1.39 million to 1.408 billion in 2024, marking the third consecutive year of population decline, following a 2.08 million drop in 2023. Although the number of newborns increased slightly in 2024, it remains insufficient to offset the aging population. There were 9.54 million newborns, up 520,000 from the previous year, but 10.93 million deaths. The decline in newborns is attributed to significantly higher childcare costs. Additionally, the one-child policy continues to impact the aging demographic and income ratios, despite some policy relaxations.

The People’s Bank of China (PBoC) injected 958.4 billion yuan, marking the second-largest injection on record. This liquidity injection aims to offset the impact of expiring medium-term loans and stimulate the economy ahead of the Lunar New Year holiday. The primary goals remain increasing credit availability and enhancing liquidity in the economic system before the extended holiday period.

Techical analysis data (5H)

Resistance: 7.2701, 7.2986, 7.3257

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 7.1874 - 7.2145 but cannot break the support at 7.2145, you may set a TP at approximately 7.2986 and SL at around 7.159 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 7.2701 - 7.2986, you may set a TP at approximately 7.3257 and SL at around 7.1874 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 7.2701 - 7.2986 but cannot break the resistance at 7.2701, you may set a TP at approximately 7.1874 and SL at around 7.3257 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 7.1874 - 7.2145, you may set a TP at approximately 7.159 and SL at around 7.2986 or according to your acceptable risk.

Pivot point January 22, 2025 08:56 PM. GMT+7