China

While China has been busy de-escalating the recent diplomatic spat with president-elect Donald Trump, with Beijing going so far as to call Trump's ambassador to China, Terry Brandstad, an "old friend", in a less diplomatic-context it is busy pushing every bellicose, nationalist button it can find. In a Thursday editorial in Global Times, China said it should "significantly" increase military spending and produce more nuclear weapons as a response to US President-elect Donald Trump,

It appears that devaluing your currency against by over 10% in a year against your major trading partners does have some affect (albeit delayed). China Exports (in Yuan terms) grew at 5.9% in November (the fastest growth since March) (well ahead of the expected 1% decline). Imports, however, also soared (by 13%) in Yuan terms. However, in USD terms, Imports rose by the most since Sept 2014 (and exports managed a small rise) as China's trade surplus slipped and missed expectations. Offshore Yuan is strengthening modestly on the print.

China have issued an ominous warning to incoming President Donald Trump, saying that he better “get in line” soon or “pay dearly”. Chinese state media reported on Tuesday that Trump’s phone-call with Taiwan’s president and subsequent Twitter rant attacking Beijing, represents a potential severing of diplomatic relations between the US and China. Yahoo News reports: “Provoking friction and messing up China-US relations won’t help ‘make America great again'”, said a front-page opinion piece in the overseas edition of Communist Party mouthpiece People’s Daily.

As reported in Frontrunning, President-elect Donald Trump will nominate Iowa Governor Terry Branstad as the next U.S. ambassador to China, choosing a longstanding friend of Beijing after rattling the world's second-largest economy by speaking to Taiwan's president. Earlier in Beijing, Foreign Ministry spokesman Lu Kang called Branstad an "old friend" of China when asked about a report on the appointment, although he added Beijing would work with any U.S. ambassador.

While in recent months, the PBOC had tried to mask the real pace of reserve outflows, covering up the accelerated selling of US-denominated assets to defend its rapidly devaluing currency, we noted in October that using more accurate calculations, China's capital outflows are once again surging, having hit $78 billion in September.