China’s economy grew 4.9% in 3Q, beating expectations. USD/CNY and USD/CNH both fell on the data release, but the key is sustainability. It could be a struggle for the RMB unless some market optimism could be rebuilt. This could be indicated by a reversal of Shanghai and Shenzhen Stock Connect net outflows, for example.

Our base case is that the People’s Bank of China (PBoC) will maintain its FX policy stance unless the Chinese economy fails to stabilise and more significant monetary easing is required. 

We expect USD/RMB to move largely sideways over the near term.