<p>I couldn't read the FT article... but...</p>

<p>According to <a href="http://www.forexblog.org/2010/10/betting-on-china-via-australia.html" rel="nofollow noreferrer">this article</a> here, China imports a lot of raw material from Australia. This means that if Chinese economy is doing well, they import a lot of stuff from Australia... hence AUD will appreciate.</p>

<p>This <a href="https://www.marketpulse.com/20190513/aud-usd-australian-dollar-dips-us-hits-china-new-tariffs/" rel="nofollow noreferrer">news piece</a>, for example, says that as China is hit with new tariffs, AUD falls. This is because the Chinese won't be able to export as much, which means they won't demand as much raw material from Australia anymore.</p>

<p>Or this <a href="https://www.dailyfx.com/forex/market_alert/2019/09/10/AUDUSD-Hits-Session-Low.-China-CPI-Tops-Forecasts-PPI-Wilts.html" rel="nofollow noreferrer">more recent article</a> says that Chinese CPI comes out higher than expected. This means that it's more likely that the PBOC (China's central bank) will need to do something to reign in inflation, slowing down the Chinese economy and Australian exports. This depreciates AUD.</p>

CC BY-SA 4.0
2019-09-17T04:05:35.737Z
2019-09-17T04:05:35.737Z
Art
<blockquote>
  <p>China's currency, the yuan (CNY), only partially reflects what goes on
  in China's economy. It doesn't trade freely; the Chinese government
  sets an official rate for it every day and only allows it to fluctuate
  1 percent around that level every day. In fact, it doesn't even vary
  that much; the average difference between the high and the low price
  last year was a mere 0.15 percent.   However, there is a version of
  the yuan (CNH) that trades freely overseas. The government doesn't fix
  a value for that, but as its value never strays that far from the
  value of the yuan, it too is relatively stable. The result is that the
  currency, whether traded on the mainland or overseas, only reacts
  modestly to Chinese economic indicators and other news that would be
  market-moving in other, freely traded currencies.</p>
  
  <p>That's why the market has turned to the Australian dollar as a proxy
  for China. The Australian economy is almost tied to the hip to China –
  about one-third of its exports go to Greater China and, perhaps more
  importantly, two-thirds of its exports are products where China sets
  the price: coal, iron ore, wool, metals, etc. The mining and
  mining-related sector alone accounts for 19 percent of gross domestic
  product, while most of the growth of the country comes from the mining
  and agricultural sectors, which are now aimed squarely at the China
  market. With the fate of the Australian economy tied so closely to
  China, it should be no surprise that people who trade the Aussie
  dollar do so with one eye on China.</p>
</blockquote>

<p><a href="https://www.cnbc.com/id/100493752" rel="nofollow noreferrer">Marshall Gittler, Watch This Currency If You Want to Trade China, 2013</a>  </p>

CC BY-SA 4.0
2019-09-17T14:26:02.210Z
2019-09-17T14:26:02.210Z
BKay
<blockquote>
  <p>The Australian dollar, often viewed by traders as a proxy for the
  Chinese economy, gained 0.3 per cent against its US counterpart.</p>
</blockquote>

<p>From: <a href="https://www.ft.com/content/b18d1c56-cf75-11e9-b018-ca4456540ea6" rel="nofollow noreferrer">S&amp;P 500 hits one-month high on renewed trade hopes</a> (September 5, 2019)</p>

<international-trade><china><currency-exchange><australia>
Why is the Australian dollar, often viewed by traders as a proxy for the Chinese economy?
q126y
# Why is the Australian dollar, often viewed by traders as a proxy for the Chinese economy?

(Asked by: username_0 on 2019-09-05)

> The Australian dollar, often viewed by traders as a proxy for the
> Chinese economy, gained 0.3 per cent against its US counterpart.

From: [S&P 500 hits one-month high on renewed trade hopes](https://www.ft.com/content/b18d1c56-cf75-11e9-b018-ca4456540ea6) (September 5, 2019)

**Tags:** international-trade, china, currency-exchange, australia

---

## 2 answers

### Answer by username_2 on 2019-09-17. Score: 4 | Accepted answer

> China's currency, the yuan (CNY), only partially reflects what goes on
> in China's economy. It doesn't trade freely; the Chinese government
> sets an official rate for it every day and only allows it to fluctuate
> 1 percent around that level every day. In fact, it doesn't even vary
> that much; the average difference between the high and the low price
> last year was a mere 0.15 percent. However, there is a version of
> the yuan (CNH) that trades freely overseas. The government doesn't fix
> a value for that, but as its value never strays that far from the
> value of the yuan, it too is relatively stable. The result is that the
> currency, whether traded on the mainland or overseas, only reacts
> modestly to Chinese economic indicators and other news that would be
> market-moving in other, freely traded currencies.
>
> That's why the market has turned to the Australian dollar as a proxy
> for China. The Australian economy is almost tied to the hip to China –
> about one-third of its exports go to Greater China and, perhaps more
> importantly, two-thirds of its exports are products where China sets
> the price: coal, iron ore, wool, metals, etc. The mining and
> mining-related sector alone accounts for 19 percent of gross domestic
> product, while most of the growth of the country comes from the mining
> and agricultural sectors, which are now aimed squarely at the China
> market. With the fate of the Australian economy tied so closely to
> China, it should be no surprise that people who trade the Aussie
> dollar do so with one eye on China.

[Marshall Gittler, Watch This Currency If You Want to Trade China, 2013](https://www.cnbc.com/id/100493752)


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### Answer by username_1 on 2019-09-17. Score: 3

I couldn't read the FT article... but...

According to [this article](http://www.forexblog.org/2010/10/betting-on-china-via-australia.html) here, China imports a lot of raw material from Australia. This means that if Chinese economy is doing well, they import a lot of stuff from Australia... hence AUD will appreciate.

This [news piece](https://www.marketpulse.com/20190513/aud-usd-australian-dollar-dips-us-hits-china-new-tariffs/), for example, says that as China is hit with new tariffs, AUD falls. This is because the Chinese won't be able to export as much, which means they won't demand as much raw material from Australia anymore.

Or this [more recent article](https://www.dailyfx.com/forex/market_alert/2019/09/10/AUDUSD-Hits-Session-Low.-China-CPI-Tops-Forecasts-PPI-Wilts.html) says that Chinese CPI comes out higher than expected. This means that it's more likely that the PBOC (China's central bank) will need to do something to reign in inflation, slowing down the Chinese economy and Australian exports. This depreciates AUD.


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