If you are at least a little aware of global financial news (and if you are on Binance, you are definitely aware!), you may have noticed that there is a lot of talk today with a noticeable "Chinese accent". And this accent sounds quite contradictory! Imagine: the markets seem to celebrate a truce with the USA, while at the same time, economic data is coming from China that makes one feel a bit uneasy. This duality of the Chinese economy is a key point in the new realities that needs to be understood.
What's the essence? After all this "trade saga", where the USA and China exchanged tariffs like boxers exchanging punches, the parties decided to take a pause. They agreed not to impose new tariffs for 90 days – that’s already a relief. But most interestingly – to sharply reduce the existing tariffs! The USA is cutting theirs from 145% to 30%, while China is reducing theirs from 125% to 10%. Not bad, right? This is a powerful signal that maybe an agreement can indeed be reached.
The markets, of course, were pleased with this signal. The yuan immediately showed character and strengthened. Chinese stocks surged upwards, showing the best day in a month. People rushed to buy shares, especially those that were hit by tariffs. For instance, some stocks like Avic Chengdu just skyrocketed, showing +120% in a day! This demonstrates how much the markets were waiting for at least some good news from the trade war front.
But here lies the very "Chinese accent" that confuses. While on one end of the wire there was optimism about the negotiations, on the other – data came from Beijing that made one want to grab a blanket. It turned out that prices in China continue to fall. Consumer prices (CPI) in April decreased for the third consecutive month, and producer prices (PPI) plummeted by 2.7% year-on-year – the strongest decline in six months! To translate into simple terms: the people inside China are in no hurry to spend, businesses see no point in producing more, and the economy is somewhat stuck.
It creates a funny but important picture for us: externally – it seems like "peace, friendship, bubble gum" and market euphoria, while internally – an economy that is a bit "under the weather" and shows some weakness. For those who are active on Binance, this is not just newspaper news. This is the "Chinese accent" that influences global risk appetite. Hope for a trade peace may push the markets up (and crypto along with it), but the internal weakness of China – the world's second-largest economy – is always a reason for caution. It's like driving a car with one headlight shining brightly ahead (trade deal) and the other blinking and dimming (deflation and weak demand).
So, friends, this first step towards a trade truce is good, and the markets appreciated it. But to understand where everything is heading next, it’s not enough just to look at the headlines. We will have to pay attention to the "boring" numbers from China. This mix of external hope and internal reality is the main "Chinese accent" of the current realities. We keep different signals in focus, as in the world of markets, the main thing is to see the full picture, even if it’s a bit contradictory.