MNI China Press Digest Jan 19: Yuan, Rate Cut, Infrastructure

The following lists highlights from Chinese press reports on Wednesday:

• The Chinese yuan is expected to remain strong against the U.S. dollar in the short term due to high domestic demand for FX settlement, despite that China-U.S. interest spread narrowed after the PBOC cut major policy rates this week, the 21st Century Business Herald reported citing analysts. However, the currency may weaken to 6.55 against the dollar by the end of 2022 as the room for further appreciation is limited should the Federal Reserve hikes rates and China’s current account surplus decreases, the newspaper said. Both the onshore and offshore yuan rose above 6.34 on Tuesday, the highest since May 2018.
• The People’s Bank of China is likely to cut interest rates once or twice following a 10-bp cut to major policy rates this week, possibly in March or June, as it may need to further boost credit and help stabilize growth before the Federal Reserve begins rate hikes, wrote Ming Ming, deputy research head of CITIC Securities, in the 21st Century Business Herald. The PBOC is also expected to further lower the reserve requirement ratios and introduce more structural tools, said Ming. In the medium term, monetary policy tends to loosen, and the interest rate of China Government Bonds has room to fall further, Mind said.
• The Shanghai government seeks to expedite the issuances of bonds for infrastructure in the first half, so as to accelerate projects and stimulate growth, the China Securities Journal reported. Shanghai plans to complete more than CNY200 billion major projects including ports, railway, rail transit, water conservancy and underground pipeline, the newspaper said citing an official document. The government will also launch several major technology-enabled projects including smart hospitals, factories and transportation, guiding more private capital to invest in these areas by offering special loans with preferential interest rates, the newspaper said.