MNI BRIEF: PBOC Sees Little Impact from Fed On China Markets

The People's Bank of China (PBOC) sees little spillover into China's financial markets from any future Federal Reserve adjustment of monetary policy, including any possible U.S. shrinkage of the balance sheet or rate increase, said Sun Guofeng, monetary policy director at the People's Bank of China, as China will continue to maintain a normal monetary policy as it has since May 2020, Sun said. Despite rising U.S. Treasury yields increasing volatility in financial markets around the world, particularly in emerging economies, China's markets have been relatively smooth with the yuan moving modestly in both directions, while its own 10-year bond yield has fallen to near 3.2%, Sun noted.

The central bank will enhance yuan exchange rate flexibility while keeping the currency stable, boost macroprudential management of cross-border capital and guide social expectations, he said, adding that maintaining the "stability of the value of the currency promotes economic growth." Seeking currency stability means "maintaining domestic prices while managing well "currency floodgate," he said.