MNI China Press Digest Jan 6: Weaker Yuan, Growth, Tax Cuts

The following lists highlights from Chinese press reports on Thursday:

• The Chinese yuan will face depreciation pressure in 2022 if the Federal Reserve hikes rates more than expected, and the U.S. economy recovers, while a likely reduction in export orders as other manufacturing bases recover also weakens yuan, the PBOC-run Financial News said in a commentary. The Fed is expected to hike rates as much as four times, which would push up U.S. Treasury yields and drive capital out of China, the newspaper said. Potential volatilities in the global financial markets due to the Fed’s rate hikes or valuation correction can worsen investors’ outlook, with risks spilling over to China through capital flows from emerging economies and increasing yuan uncertainty, the newspaper said.
• China’s growth in 2022 will be driven by accelerated infrastructure investment, technology-focused manufacturing investment, a gradual recovery in consumption and resilient exports, the China Securities Journal reported citing analysts. Traditional infrastructure investment in electricity, transportation, water conservancy and rural revitalization will be the main driver, the newspaper said. Investments in new infrastructure for new energy and information network may reach up to CNY3 trillion this year, the newspaper said citing analysts.
• China will promptly implement new and greater tax and fee reductions to ensure a stable economic start in Q1, as renewed downward pressure requires greater cross-cycle policies, Xinhua News Agency reported citing Premier Li Keqiang, who spoke in a meeting touting tax and fee cuts. Deduction for R&D expenses and value-added tax rebates should be increased to promote the upgrade of manufacturing enterprises, while targeted measures should be given to the service industries hurt by the pandemic to stabilize employment, Xinhua said. The central government will continue to increase transfer payments to local governments to ensure tax and fee cuts, the newspaper said.