MNI China Press Digest Aug 24: Weaker Yuan, Power Rationing

The following lists highlights from Chinese press reports on Wednesday:

• It is widely expected that there will be some depreciation pressure on the yuan in Q4, given the upward trend of the U.S. dollar index, with most foreign banks’ year-end forecasts for the yuan sitting between 6.70 and 6.95 against the dollar, Yicai.com reported. This round of yuan depreciation will be milder than what was seen in the second quarter as the Chinese economy is still likely to recover in H2, with fiscal stimulus and monetary easing kicking in, the newspaper wrote, citing HSBC. Some analysts believe any yuan movement will be tied to the degree of resilience observed in Chinese exports through the remainder of the year, the newspaper highlighted.
• Moderate depreciation for the yuan is conducive to maintaining export competitiveness against the backdrop of a global economic downturn, and is a positive when it comes to stabilizing China’s growth, the Securities Times wrote. The yuan has shown resilience when compared with the recent sharp decline in the euro and Korean won, as the U.S. dollar index reached a 20-year high. The newspaper played down any impetus from the recent movement in interest rate differentials, suggesting such moves have a limited impact on the yuan, as no obvious foreign capital outflows were triggered after the PBoC’s surprise rate cut in mid-August.
• The recent power rationing observed in several provinces in Southwest China, owing to the well-documented heatwaves, reveals an urgency to promote the market-based reform of the country’s power system, said Yicai.com in an editorial. Provinces such as Sichuan are facing peak load demand, while high temperatures resulting in 40% lower rainfall levels have more than halved hydropower generation capacity, the newspaper said. China should build a power grid that conforms to the future power structure and adapts to the volatility of new energy sources such as wind and solar, the newspaper said. Furthermore, the country aims to add more than six times the level of current new energy capacity to achieve carbon neutrality, the newspaper noted.