Welcome to our weekly EM Watch series, where we focus on the diverging economic trends in China, where local consumption seems to be on the floor, while the export sector is still gaining momentum. Additionally, an interesting niche case in Panama requires some attention.

The USDCNY pressures are more fierce than they have been at any time since the pandemic, and we are once again approaching the intervention zone around 7.30 in USDCNY.

Judging from the quarterly average of the RMB stress indicator, the pressure on the PBoC is larger than it has been at any point since the pandemic. Proxies of state-bank interventions in the CNY market hint at material selling pressures and continued capital flight from China.

Will they stand pat on the “you shall not pass” policy around 7.30 in USDCNY, or is this the time they allow the level to go? Given the recent hiccups in US key figures and apparent weakness in the USD versus other peers, China will most likely wait and see if they get help from the USD side of the equation, including cuts from the Federal Reserve.

Chart 1: The market pressure is immense in USDCNY