How bad is the Chinese economy?
Explore the current challenges facing the Chinese economy: slowing GDP growth, fluctuating PMI, historic low interest rates, and a weakening Yuan. Discover how these factors create volatile trading conditions and potential risks.

Key points
- Chinese GDP is consistently underperforming from pre-pandemic levels
- Chinese PMI data has pointed to a contractionary economy on multiple readings in recent months
- The People's Bank of China has substantially lowered interest rates in attempt to stimulate growth
- The Chinese yuan (CNH) is near historic lows against the US dollar
- Other economic indicators such as new loans and exports have been volatile and unstable
Chinese GDP trending lower
Since 2021, China's GDP growth rates have hovered around 1.0%, a significant drop from the pre-pandemic levels of 1.5-2.0%. This decline is marked by quarterly growth rarely falling below 1% prior to 2020, contrasting sharply with the country's economic performance during the pandemic. As traders, understanding this downward trajectory helps gauge China's market stability and potential for recovery.
Chinese PMI under 50 multiple times
Another indicator of economic health is Purchasing Managers' Index (PMI). Chinese PMI has fallen below 50 multiple times in recent years, after remaining exclusively above 50 pre-pandemic dating all the way back to February 2016. This trend in manufacturing data indicates a shift from expansionary (>50) to contractionary (<50) phases in the economy. This transition reflects broader economic challenges post-pandemic, with recent months showing inconsistent data, introducing volatility and unpredictability in trading strategies focused on Chinese markets.
Lowest Chinese interest rates in more than 10 years
The People’s Bank of China has reduced interest rates to historical lows, continuing a trend of cuts initiated in early 2020 in response to pandemic-related economic challenges. These lower rates aim to stimulate growth but have coincided with a weakening of the yuan, affecting forex markets and highlighting disparities in global economic recovery rates.
Chinese yuan at its lowest prices
As a result of these economic conditions, the yuan has depreciated significantly, with USD/CNH nearing its highest levels in a decade. This devaluation could potentially boost exports and help the Chinese economy more broadly, but has created a complex trading environment for currency traders. Forex traders should watch for potential shifts in policy that could either stabilize or further weaken the yuan.
Chinese data volatile in response to easing
Following rate cuts, key economic indicators like new yuan loans and exports have displayed significant volatility. This erratic data, ranging from sharp increases to severe dips, reflects the challenges in achieving sustained growth and should be carefully monitored by traders for signs of stabilization or further decline.
Will Chinese yuan continue to devalue?
The ongoing monetary easing by the People's Bank of China could drive the yuan to further lows. Market sentiment is divided on whether these measures will lead to recovery or exacerbate economic weaknesses. Traders should consider the broader implications of China’s monetary policy on forex strategies, especially in pairs involving the Yuan.
How to trade Chinese yuan
- Open an account to get started, or practice on a demo account
- Choose your forex trading platform
- Open, monitor, and close positions on CNH pairs
Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.
You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.
Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.