USD/CNH is stable around 7.1260, while the Hang Seng China Enterprises Index is up by 2.4%. The Communist Party’s Central Committee has started a four-day meeting, called the Fourth Plenum, to set China’s economic and tech goals for the next five years. China’s GDP growth has surpassed expectations, rising by 1.1% from the previous quarter compared to the expected 0.8%. This follows a 1.0% increase in Q2, with an annual growth of 4.8%, down from 5.2% in Q2. While China has met its growth targets, its long-term economic health is at risk due to a heavy reliance on industry, especially in exports and manufacturing, while consumer spending remains low.

Economic Performance and Indicators

For the first nine months of this year, retail sales grew by 4.5% compared to last year, slightly lower than August’s 4.6%. Industrial production continued to grow at 6.2% year-on-year. However, fixed asset investment unexpectedly dropped by 0.5%, diverging from the expected 0.1% rise and previous month’s 0.5%. When excluding real estate, fixed asset investment increased by 3.0%. This indicates that a gradual revaluation of the currency might boost consumer spending by making imports cheaper. As of October 20, 2025, China’s economy shows patterns similar to recent years. The Q3 GDP data released last week indicated a year-over-year growth of 4.9%, just above forecasts but still highlighting existing divides. The USD/CNH has risen to 7.28, revealing ongoing economic pressures that monetary stimulus has not yet addressed. The major concern is weak domestic demand, a trend we’ve observed for several years. September 2025 saw retail sales grow by just 2.8%, while housing prices in 70 cities fell for the 14th month in a row. On a brighter note, industrial production grew by 5.5%, driven by strong exports in sectors like electric vehicles.

Monetary Policy and Market Strategy

This situation puts the People’s Bank of China in a challenging position. If they cut interest rates further to support the property market, it could weaken the currency. The PBoC is likely focused on avoiding chaotic depreciation and maintaining a stable environment for the yuan. For those trading derivatives, selling volatility on USD/CNH could be a strategy worth considering, especially with instruments like short strangles to bet that the currency will stay within a narrow range. Given the ongoing weaknesses, it may also be wise to prepare for any surprise stimulus measures. The government might have to implement a larger support package to restore consumer confidence. A cost-effective way to position for this is by buying call options on struggling Chinese equity indices, such as the Hang Seng China Enterprises Index, which could benefit from a policy shift leading to a rally. Create your live VT Markets account and start trading now.

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