The Chinese government continues to implement policies aimed at stimulating domestic economic growth.

The yuan has rapidly appreciated after previously weakening due to former U.S. President Donald Trump’s announcement of an additional 10% tariff on Chinese imports. This tariff will take effect on March 4, 2025, and is expected to put significant pressure on China’s export-driven economy. Meanwhile, investors are anticipating further economic stimulus measures from the government in the upcoming week. The upcoming meeting is expected to reaffirm the government’s commitment to policies that focus on boosting domestic economic growth, ensuring that the economy rebounds despite economic pressures and the ongoing trade war.

The People's Bank of China (PBoC) has increased liquidity injections to ease market concerns over tight liquidity conditions in the bond market. The central bank injected a net 84 billion yuan in cash, marking the largest liquidity injection in February. According to Bloomberg News, this liquidity boost aims to stabilize the yuan amid various economic challenges. At the same time, interest rate cuts have put direct pressure on the bond market, driving the yield on 10-year government bonds to a three-month high.

Foreign direct investment (FDI) into China fell by 13.4% year-on-year to approximately 98 billion yuan in January, marking the weakest start to a year in four years. On an annual basis, FDI declined by 27.1% in 2024, the sharpest drop since 2008. This decline in January reflects weakened foreign confidence in large-scale economic projects in China, which have faced deflationary risks and concerns that the government has been slow in implementing economic stimulus measures. Additionally, foreign investors remain uneasy due to the lack of transparency in the financial statements of manufacturers and service providers. However, signs of government support for the economy have persisted, leading to a boost in confidence in Chinese stocks towards the end of the year.

Furthermore, China has launched a new initiative to stabilize foreign investment, particularly by expanding market access and promoting additional investment opportunities. This initiative includes several key measures, such as encouraging foreign companies to invest in the Chinese stock market and attracting high-quality foreign capital for long-term investments in publicly traded companies. The initiative also supports multinational companies in establishing and expanding operations within China while simplifying regulations for mergers and acquisitions. The leading industries targeted under this initiative include telecommunications, healthcare, and education.

The yield on China’s 10-year government bonds has surged to 1.8%, the highest level in two months, as investors shift towards riskier assets in response to the government’s large-scale liquidity injections to attract foreign investment. This move underscores China’s commitment to greater economic openness despite ongoing geopolitical tensions. Additionally, policies aimed at rural revitalization have been introduced, focusing on agricultural reforms and economic growth in rural areas. These efforts contribute to strengthening overall economic stability.

Techical analysis data (5H)

Resistance: 7.2848, 7.2909, 7.294

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 7.2725 - 7.2756 but cannot break the support at 7.2756, you may set a TP at approximately 7.2909 and SL at around 7.2664 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 7.2848 - 7.2909, you may set a TP at approximately 7.294 and SL at around 7.2725 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 7.2848 - 7.2909 but cannot break the resistance at 7.2848, you may set a TP at approximately 7.2725 and SL at around 7.294 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 7.2725 - 7.2756, you may set a TP at approximately 7.2664 and SL at around 7.2909 or according to your acceptable risk.

Pivot point February 28, 2025 09:12 PM. GMT+7