MNI BRIEF: PBOC Says Market To Play 'Decisive' Role in FX - Yi

People's Bank of China Governor Yi Gang backed the role of markets in determining the value of the Chinese yuan and flagged ongoing support for the ailing property sector in a speech in Hong Kong.

Yi said the yuan would remain stable at a reasonable level and follow market conditions after the CNY weakened to 7.32 against the U.S. dollar - the lowest since 2008 - on November 1. “We continue to insist on market mechanisms playing a decisive role in forming exchange rates” Yi said. (See CNH : USD/CNY Mid-Point Reset To Fresh Cycle Highs, PBOC Gov Yi Speaks)

The Governor said China would continue with its prudent monetary policy to support growth. “We are focused on maintaining ample liquidity, with loan balances and social financing showing positive trends recently” Yi said. He hinted at the reactivation of its Pledged Supplemental Lending, noting that “through structural monetary policy tools, we have increased support for key areas and weak links.” He expected recent PBOC measures to boost infrastructure development will be seen in Q4 economic data.

China's property market had been a handbrake on growth but Yi saw positive trends. “There have been improvements in property sales and lending recently”, he said. He said the PBOC will continue supporting the healthy development of the property sector, and local governments will play an important role in stabilising their local real estate markets.

China can maintain reasonable levels of economic growth despite Covid disruptions, Yi said. He cited moderate levels of inflation, and stability in labour and FX markets as reasons for optimism.

“China still has potential for growth, with its large market, growing middle class and urbanisation, we have skilled workers and a high-class industrial system” Yi said, adding that “tech innovation and structural reforms will continue to be drivers of economic growth”.