The economic powerhouse, China is destined to surpass US as the biggest economy in the world. European think tank, the Organisation for Economic Cooperation and Development predicts seismic economic shifts across the next 50 years. This growing sense of inevitability elevates the impact of Chinese economic policy throughout the trading community. CFDs also known as contracts for difference can be used to take a position on economic change.
The Australian relationship with Chinese industry can be interpreted as heavily embedded within Australian trading patterns. A recent meeting at the East Asian Summit between Wen Jiabao and Julia Gillard serves to re-enforce a strong connection between Chinese and Australian economic fundamentals. Building an understanding of the cogs at work within Chinese macroeconomics can be utilised as part of your trading strategy.
As Chinese Premier Wen Jiabao pushes towards a mutually beneficial bilateral free trade pact for the Australian energy and mining industry. Julia Gillard is quick to support, ”Of course our economic relationship is a vital one for Australia’s national interest and it’s growing in leaps and bounds.”
Accelerated growth across China in the next 10 years, could boost global gross domestic product to 15%. Goldman Sachs predicts that within a year Chinese GDP figures will hit 8%, a clear contrast to the US 2.5%.
Disposable income spread across 26 out of 28 Chinese provinces continues to exceed GDP, pumping consumer led demand. The most notable margin Hainan province saw a disposable income increase of 14% as GDP grew by 8.4%. Compounding goals already set out by the 18th National Congress of the Communist Part of China, aiming to double per capita income by 2020.
As China continues to develop so too does its relationship with forex. Despite surpassing US economic growth, the Yuan remains heavily impacted by US Dollar movement. A rising or falling US dollar is often echoed by the Yuan, reducing the stand alone popularity of CNY. China continues to make efforts towards separating this connection, a movement highlighted by the introduction of CNY denominated bonds into Hong Kong. Zhou Xiaochuan, central bank governor is exploring a range of initiatives designed to promote cross-border Yuan business. These include individual cross-border yuan usage and transaction settlement.
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