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MNI China Press Digest Dec 12: Yuan, SMEs, Interest Rates

MNI picks keys stories from today's China press
Central Bank NewsPolicy NewsPBOCHomepageAPACChinaEM Policy NewsEM Central Bank NewsPeoples Bank of ChinaPolicy StoryStoryRegion

Highlights from Chinese press reports on Thursday:

  • The yuan will likely stabilise and then rise given the U.S. dollar’s weakening trend, China's economic improvement, and increasing foreign exchange settlement by year-end, the central-bank-run Financial News reported, citing experts. The newspaper said the greenback will further weaken as institutional investors tend to sell off dollar assets to ensure year-end profits. Further yuan support will come as Chinese firms increase forex settlement during seasonal peak month of December, and as China's goods trade surplus expanded by 12.9% y/y in the first 11 months, the newspaper said.
  • Officials have issued guidelines to increase SME access to equity, loan, insurance and guarantee financing, Securities Daily has reported. The guidelines, issued by five government departments including the Ministry of Finance and the People's Bank of China, will help strengthen policy coordination and deepen cooperation between the industrial and financial sector, according to Zheng Lei, chief economist at Samoyed Cloud Technology Group. SMEs face financing difficulties due to insufficient credit assessment, information asymmetry and a lack of collateral, Zheng said, noting the new measures will allow better integration of corporate credit information therefore reducing the credit risk of financial institutions.
  • Authorities and market participants should be cautious in assuming China needs a low interest rate environment in the future, despite the need for policy rate cuts in the short term to address weak demand and low confidence, according to Hu Xiaopeng, deputy director at the Institute of World Economics at the Shanghai Academy of Social Sciences. Interest-rate hikes in the medium- to long-term may best suit China’s interests given the economic growth expected from technological advancement, while the Federal Reserve’s cutting cycle allows Beijing to attract global capital to support the development of strategic objectives, Hu added.
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Highlights from Chinese press reports on Thursday:

  • The yuan will likely stabilise and then rise given the U.S. dollar’s weakening trend, China's economic improvement, and increasing foreign exchange settlement by year-end, the central-bank-run Financial News reported, citing experts. The newspaper said the greenback will further weaken as institutional investors tend to sell off dollar assets to ensure year-end profits. Further yuan support will come as Chinese firms increase forex settlement during seasonal peak month of December, and as China's goods trade surplus expanded by 12.9% y/y in the first 11 months, the newspaper said.
  • Officials have issued guidelines to increase SME access to equity, loan, insurance and guarantee financing, Securities Daily has reported. The guidelines, issued by five government departments including the Ministry of Finance and the People's Bank of China, will help strengthen policy coordination and deepen cooperation between the industrial and financial sector, according to Zheng Lei, chief economist at Samoyed Cloud Technology Group. SMEs face financing difficulties due to insufficient credit assessment, information asymmetry and a lack of collateral, Zheng said, noting the new measures will allow better integration of corporate credit information therefore reducing the credit risk of financial institutions.
  • Authorities and market participants should be cautious in assuming China needs a low interest rate environment in the future, despite the need for policy rate cuts in the short term to address weak demand and low confidence, according to Hu Xiaopeng, deputy director at the Institute of World Economics at the Shanghai Academy of Social Sciences. Interest-rate hikes in the medium- to long-term may best suit China’s interests given the economic growth expected from technological advancement, while the Federal Reserve’s cutting cycle allows Beijing to attract global capital to support the development of strategic objectives, Hu added.