Free Trial

J.P.Morgan: Macro-Prudential Defense Mostly Symbolic, Unlikely To Have Big Impact On Flows


J.P.Morgan believe that the PBoC’s “latest adjustment of the cross-border financing parameter belongs to the broader set of macro-prudential tools that the PBoC uses to manage systemic FX risks.”

  • “While these measures are not new and have been frequently deployed during previous currency depreciation episodes, they tend to work less efficiently than direct/indirect PBoC intervention or CNY fixings in short-circuiting currency weakness.”
  • “With external financing remaining much more costly than domestic borrowing, relaxation on cross-border financing restrictions is unlikely to attract much interest from corporates to lever up externally.”
  • “Since 2022, Chinese corporates have been paying down external deb, a trend we expect to have legs in 2H23.”
  • “In the meantime, onshore FX loans have also been falling at a much faster pace than FX deposits since last year, pushing the FX loan/deposit ratio to post-GFC lows.”
  • “This reflects the structural reluctance from corporates to tap external/USD financing given elevated costs, a behaviour that is unlikely to change fundamentally in the near term, despite the PBoC lifting the quota of external borrowing.”
  • “We see risk reward still favouring positioning for further CNY weakness regardless of the USD narrative in 2H23 (long USD/CNY on stronger DXY moves and short CNY basket on a weaker DXY).“
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.