China's Central Bank Prioritizes RMB Stability Amid Global Economic Pressures
Policy measures intensified to protect the yuan from strong US dollar shifts, ensure economic balance
China's central bank has reinforced its commitment to maintaining the stability of its currency, the renminbi (RMB), against a backdrop of a robust US dollar and global economic uncertainties.
This was emphasized by Pan Gongsheng, the Governor of the People's Bank of China (PBOC), during his address at the Asian Financial Forum in Hong Kong on Monday.
Pan Gongsheng vowed to prevent the risk of exchange rate overshooting by rectifying pro-cyclical market behaviors and addressing actions that disrupt market order.
'We will steadfastly prevent the risk of the exchange rate overshooting, ensuring that the yuan exchange rate remains generally stable at a reasonable, balanced level,' Pan said, underscoring the currency's resilience despite depreciation pressures observed in non-US currencies globally.
China's central regulators, including the PBOC and the State Administration of Foreign Exchange, have taken concrete steps to bolster market confidence.
They increased the macro-prudential adjustment parameter for cross-border financing of corporates and financial institutions to 1.75 from 1.5, allowing greater overseas borrowing, thereby enhancing onshore dollar liquidity and supporting the yuan.
Complementing these measures, the central bank issued 60 billion yuan ($8.18 billion) worth of central bank bills in Hong Kong, aiming to stabilize the offshore yuan, signaling the repeated message of yuan stabilization to prevent excessive short-term depreciation expectations.
Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, emphasized the strong policy stance, saying regulators are prepared to leverage additional policy reserves, such as managing overseas lending and adjusting foreign exchange required reserves, to contain potential capital outflows and boost dollar liquidity onshore.
The FX market supervision is expected to intensify as the China FX Committee pledged prompt actions against market-disruptive behaviors while urging members to avoid escalating pro-cyclical conduct.
By Monday afternoon, the yuan saw a modest rally against the dollar, reflecting recent policy influences.
Economic experts like Zhong Zhengsheng, chief economist at Ping An Securities, point out that sustained economic growth is crucial to support the Chinese currency.
He highlighted the importance of front-loading countercyclical adjustments to boost confidence and economic momentum, citing the essential coordination between fiscal policies and monetary easing for yuan stability.
Pan further articulated the central bank's strategy to support economic growth, utilizing varied tools to maintain an accommodative financing environment while leveraging exchange rates as a stabilizer for the macroeconomy.
He mentioned plans to increase the share of national foreign exchange reserves in Hong Kong, aligning with the broader strategy to safeguard economic equilibrium and currency stability.
This was emphasized by Pan Gongsheng, the Governor of the People's Bank of China (PBOC), during his address at the Asian Financial Forum in Hong Kong on Monday.
Pan Gongsheng vowed to prevent the risk of exchange rate overshooting by rectifying pro-cyclical market behaviors and addressing actions that disrupt market order.
'We will steadfastly prevent the risk of the exchange rate overshooting, ensuring that the yuan exchange rate remains generally stable at a reasonable, balanced level,' Pan said, underscoring the currency's resilience despite depreciation pressures observed in non-US currencies globally.
China's central regulators, including the PBOC and the State Administration of Foreign Exchange, have taken concrete steps to bolster market confidence.
They increased the macro-prudential adjustment parameter for cross-border financing of corporates and financial institutions to 1.75 from 1.5, allowing greater overseas borrowing, thereby enhancing onshore dollar liquidity and supporting the yuan.
Complementing these measures, the central bank issued 60 billion yuan ($8.18 billion) worth of central bank bills in Hong Kong, aiming to stabilize the offshore yuan, signaling the repeated message of yuan stabilization to prevent excessive short-term depreciation expectations.
Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, emphasized the strong policy stance, saying regulators are prepared to leverage additional policy reserves, such as managing overseas lending and adjusting foreign exchange required reserves, to contain potential capital outflows and boost dollar liquidity onshore.
The FX market supervision is expected to intensify as the China FX Committee pledged prompt actions against market-disruptive behaviors while urging members to avoid escalating pro-cyclical conduct.
By Monday afternoon, the yuan saw a modest rally against the dollar, reflecting recent policy influences.
Economic experts like Zhong Zhengsheng, chief economist at Ping An Securities, point out that sustained economic growth is crucial to support the Chinese currency.
He highlighted the importance of front-loading countercyclical adjustments to boost confidence and economic momentum, citing the essential coordination between fiscal policies and monetary easing for yuan stability.
Pan further articulated the central bank's strategy to support economic growth, utilizing varied tools to maintain an accommodative financing environment while leveraging exchange rates as a stabilizer for the macroeconomy.
He mentioned plans to increase the share of national foreign exchange reserves in Hong Kong, aligning with the broader strategy to safeguard economic equilibrium and currency stability.
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