PMI data will be the main economic driver for Asian markets this week, but the tone will be set by the increasingly tense political situation in China.
Thousands of people took to the streets in several cities across the country in an unprecedented protest against the government’s strict coronavirus restrictions after a deadly fire broke out in an apartment in Urumqi, in the country’s far west
The wave of civil disobedience and clashes between protesters and police comes amid mounting frustration with President Xi Jinping’s policy of not spreading the coronavirus. China reported new cases of coronavirus for four consecutive days.
“Down with the Chinese Communist Party, down with Xi Jinping,” a crowd in Shanghai in the early hours of Sunday morning, according to witnesses and videos posted on social media, shouted.
It is safe to say that this does not happen often, and the world is watching with interest to see how Beijing deals with the brewing crisis.
From a spot market perspective, the outbreak of the coronavirus and the nationwide unrest kills any hope that China is about to reopen its economy. It doesn’t look like restrictions will be lifted any time soon, and growth will continue to suffer.
In this context, Wednesday’s PMI figures are expected to show that Chinese factory and service sector activity contracted again in November, another indication that Beijing will maintain its loose stance on monetary policy.
If so, the yuan is likely to come under renewed pressure, especially after the central bank said on Friday it would cut the amount of liquidity banks must hold in reserves, injecting about $70 billion in liquidity into the ailing economy.
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