How to Trade China's Upcoming Economic Data

Great Wall of China photo composite
Great Wall of China

Wondering how China is doing? You'll get plenty of clues this week. China will be releasing its latest figures on consumer prices, retail sales, and industrial production.

The big question, says Rebecca Patterson, chief markets strategist for J.P. Morgan Asset Management, Institutional, is what it all will spell for the yuan.

"You can't forget China. It's the second biggest economy in the world these days," she says. "It's as important if not more so than what we're getting out of the United States for global sentiment."

Still, the data could be tricky, and it's difficult to get a clear picture of exactly what is happening in the Chinese economy. That's why Patterson has a multi-layered plan.

  • Growth data that are better than expected, or even just in line with expectations, would be the best outcome. "The market's going to be relieved that things aren't getting any softer," Patterson says. She would buy cyclical and regional currencies, such as the Australian dollar

and the Singapore dollar against the greenback.

  • If data come in a little soft, or if we see soft growth and high inflation, that will spook investors, Patterson says. "Then I think you want to buy the Swiss franc against the dollar," and you want to stay away from the cyclical currencies.
  • If the Chinese government raises rates — and there have been rumors it will — that would throw off all these scenarios, says Patterson. In that case, she would sit it out and wait for more direction.

You can watch the whole discussion right here, starting at 7:46.


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