China has struggled through 2014 with weaker than expected economic performance. This has reduced demand for commodities and the Chinese slowdown added to the decline in commodity prices especially outside of the price of oil. This has further dragged down the Australian Dollar and the New Zealand Dollar as well as the Canadian Dollar. This is one example of how the global economy is connected.

Discussions about the health of the Chinese economy have been the focus for all of 2014 with the prime focus being on whether China can avoid a hard landing which would ripple through financial markets. Looking at Chinese data is slightly different than looking at the data of developed economies. One prime example is the Gross Domestic Product or GDP. In developed economies a negative GDP reading is the sign for severe problems while in China a reading below 7.0% is often cited as the threshold for when severe problems will be evident out of China.

Given the size of China figures printed by the Chinese economy often dwarf anything reported by other economies. China has barely escaped a much bigger economic deterioration in 2014 and finished December with slightly better than expected economic data. Given the very low levels for comparison forex traders did not react positively to the minor upside surprise out of China. Commodity currencies remained near multi-week lows.

The Chinese GDP for the fourth-quarter rose 1.5% quarterly and 7.3% year-over-year. When viewed on a quarterly comparison the GDP report came in much weaker than the third-quarter’s growth rate of 1.9% and also missed expectations for an increase of 1.7%. The year-over-year GDP did beat expectations which called for an increase of 7.2% and rose 7.3% matching the third-quarter figure. This kept the Chinese economy out of hot waters, but remains dangerously close to that 7.0% level.

Industrial production rose 7.9% in December year-over-year which was much better than the 7.4% increase expected and well ahead of November’s 7.2% increase. This was the biggest positive surprise out of China. Adding to the slight optimism was an increase in retail sales of 11.9% for December year-over-year. This beat expectations for an increase of 11.7% which would have matched the 11.7% reported in November. Maybe the Chinese dragon is awakening.