Commerzbank Says New Yuan Measures Encourage Capital Outflows

Commerzbank point out that the Chinese regulators have rolled out new measures to reduce the appreciation pressure on CNY. Under the new regulation, the onshore Chinese corporate are allowed to lend more to its offshore affiliates. The quota will be increased to 50% of the company's shareholder equity from 30%. The PBoC said the new measure is to support the needs of "going global" and would expand the usage of offshore renminbi. Given the current strong momentum the Chinese currency, the new regulation also appears to encourage capital outflows which would help ease the appreciation pressure on the Chinese currency.

• On a related note, China's private Caixin services PMI eased to 56.3 for December from 57.8 in the prior month. As both Caixin manufacturing and services PMIs unexpectedly moderated, the composite PMI fell to 55.8 from 57.5 previously. In general, both official and private PMIs point to a softening growth momentum in China.