The Chinese government is likely to implement more economic stimulus policies.

The Chinese yuan has slightly depreciated to 7.26 yuan per US dollar due to continued investor concerns over escalating trade tensions. However, the disclosure of China’s GDP growth target for 2025 at around 5% has fueled expectations for additional economic stimulus measures.

China’s services PMI surged to 51.4 in February, rebounding from a four-month low of 51 in January. This increase was driven by a rise in new business, amid improving domestic demand. At the same time, foreign sales grew for the second consecutive month, reflecting solid external demand. Employment in the service sector increased slightly after two months of decline. Meanwhile, input costs decreased for the first time since 2020 due to weakening market demand, which led to a slight drop in selling prices as companies had to offer discounts to stay competitive.

China has set its GDP growth target at approximately 5% for 2025, the same as the previous year, despite ongoing trade tensions with the US. Additionally, China plans to stimulate domestic demand further by expanding fiscal spending, issuing over 1.3 trillion yuan in special long-term bonds, and increasing spending to 1.78 trillion yuan to boost the economy this year.

The Chinese government remains committed to attracting foreign investment by making the economic environment more favorable for investors. Defense spending is expected to grow by around 7.2%, the same rate as last year. Furthermore, China has raised its deficit-to-GDP ratio from 3% to 4% in 2024. Inflation is expected to decline to around 2%, as deflationary pressures continue to weigh on the domestic economy.

Additionally, China has announced tariff increases on US imports and other countermeasures in response to former US President Donald Trump’s decision to raise tariffs on all Chinese imports from 10% to 20%. As a result, the Chinese government decided to impose a 15% tariff on certain US products and an additional 10% on consumer goods. However, the US claims that these tariff hikes aim to pressure China into controlling the import of illegal drugs, particularly fentanyl. Moreover, Trump has imposed a 25% tariff on Canada and Mexico, demanding stricter border control measures. Investors anticipate that the Chinese government will introduce new stimulus measures to help the domestic economy cope with the impact of higher tariffs.

The yield on China’s 10-year government bonds has dropped to around 1.75% as trade tensions intensify, prompting investors to seek safe-haven assets, particularly government bonds. Investors continue to await further economic data to predict the Chinese government’s upcoming stimulus measures.

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 March 5, 2025 09:22 PM. GMT+7