Here's Why People Are Jittery About China Today
However, China's Shanghai Composite fell 0.3%. Bloomberg reports that Yuan forward contracts have fallen by 0.32% in the past three days.
Morgan Stanley's Hans Redeker thinks he knows what's going on. From his FX Morning note:
Overnight, China's commodity prices fell sharply (coal: -2.2%, iron ore: -2.25%) on rumors that China will lower its 7.5% growth target to 7%. Note, financing costs in the real economy have been rising despite abundant money supply, with some facing costs of 10% to 15%. The rise of financing costs is required to reduce the leverage risk, but suggests slower economic growth for now. China Railway Corporation said that national investment in railway infrastructure construction fell for a third consecutive month in November, by 7% to CNY64.8bln. The RBA's Stevens and PM Abbott undertook further efforts to push AUD lower, mentioning AUDUSD 0.85 as a target. Commodity currencies are set to stay offered.
We're not certain where Redeker heard that rumor.
But here's Bloomberg's Fion Li today: "Chinese policy makers may cut the nation's 2014 economic growth target to 7 percent from 7.5 percent at an annual conference, the Economic Information Daily said Dec. 3."
According to ForexLive, that Dec. 3 report also included a CPI target of 3.5% and an M2 growth target of 13%.
The consensus among Wall Street's economists is that China's economy will indeed decelerate in 2014, so a lowered growth target wouldn't be a big surprise.
Nevertheless, it may be jarring to see officials actually commit to a growth target that's lower than that of the year before.