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BEIJING -- China bourses were in the green Monday, with the Hang Seng Index gaining 0.7% to 16,016 and the Shanghai Composite Index advancing 0.9% to 1,684.

On Friday, Chinese stocks ended mixed in New York.

Tom Online

( TOMO) fell 3.7% to $20.59, while


(NTES) - Get NetEase Inc. Report

rose 1.5% to $20.94 and

China Mobile

(CHL) - Get China Mobile Ltd. Report

gained 2.6% to $27.23.

In a striking currency move, on Monday the Chinese yuan appreciated by nearly 0.2% against the U.S. dollar. It was the biggest one-day drop in the dollar since July 21 last year, when Beijing revalued the yuan upward by 2.1%.

J.P. Morgan economist Frank Gong said the move was specifically triggered by the big decline of the U.S. dollar on Friday after a disappointing employment report. Last week U.S. nonfarm payroll numbers clocked in below expectations.

But in the bigger picture, it's the first time the People's Bank of China allowed the yuan to respond to overnight dollar weakness with such vigor. The currency move may show that China's central bank is "finally ready to allow the renminbi on a faster appreciation path," Gong wrote in a note late Monday.

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That makes sense, he added, since the "root problem of overheating risk" can be traced to China's currency exchange.

U.S. politicians are fond of complaining that China's yuan (also known as the renminbi) is grossly undervalued relative to the dollar, contributing to a massive cross-Pacific trade deficit.

At this point, most economists agree that China would be better off relying less on exports -- which makes it vulnerable to a slowdown in the U.S. and other markets -- and depending more on demand from a growing base of Chinese consumers.

But with a weak yuan, China has found it difficult to rein in surging export growth. Trade figures to be released sometime this week are likely to show China's export growth accelerated to 25% year on year in May, up from 23.8% in April, according to Lehman economist Rob Subbaraman.

One factor behind the expected rise in exports, he says, is the weakening of the yuan against a trade-weighted basket of currencies. Others are strong overseas demand for China-made goods and a continued trend of manufacturing outsourcing to China from the U.S. and Europe.

Given increasing evidence of unsustainable growth in exports, as well as money supply and credit, Subbaraman says he's gradually become more concerned about the economic outlook in China.

Two weeks ago, he first invoked the specter of a much-feared "hard landing" in China, saying he now believes there's a one in three chance that GDP growth could slow to 5% or less sometime in the next three years.

Granted, the near-term outlook is still robust. Even with April's interest rate hike, he believes China should be able to deliver a 9.5% GDP increase this year.

But the downside risks are increasing, given its lopsided ratio of fixed asset investments to domestic consumption.

"There are signs that investment growth has not cooled down sufficiently, that exports continue to rise as a share of GDP in China," he explained.

On top of that, he argues the government's policy measures have been inadequate so far. These have lately included hiking the lending rate by (a mere) 27 basis points to 5.85%, asking banks to curb their lending, slapping a 20% capital gains tax on sales of second homes, and trying to mop up liquidity by selling bonds.

While April's mild monetary tightening was welcome, it's not clear it will be effective. Authorities need to implement "sharply higher" interest rates and allow for a more flexible and stronger yuan, Subbaraman says.

"China's increasingly a market-based economy and it needs market-based style measures, such as using interest rates more, allowing the currency to appreciate. But we see no sign of a major overhaul in policy" yet, he said.