MNI China Press Digest Feb 17: Yuan, Easing Space, Debt Ratio

The following lists highlights from Chinese press reports on Thursday:

• The yuan has sufficient strength to allow China to pursue independent monetary easing, the Securities Times reported citing analysts. Even as the Federal Reserve's expected rate hike may weaken the Chinese currency, the depreciation will be manageable, as the current strong yuan matches the economic fundamentals, the newspaper said citing Zhang Yu, chief analyst of Huachuang Securities. The yuan is expected to reach 6.35 against the U.S. dollar by the end of December and 6.1 by 2023 yearend, supported by a high current account surplus of about USD380 billion per year and increasing holdings of yuan assets, the newspaper said citing Xiong Yi, chief economist of Deutsche Bank China.
• China's low reported January inflation has given the People’s Bank of China space to further ease its monetary policy and stimulate economic growth, the Shanghai Securities News reported citing analysts. CPI in January eased to 0.9% y/y, down 0.6 pp from December, while PPI's gain narrowed by 1.2 pp to 9.1%, official stats on Wednesday showed. The PBOC may consider an RRR cut to ensure ample liquidity, as the total amount of infrastructure-back special bonds may increase significantly from last year, requiring better credit and social financing support, the newspaper said citing Lian Ping, the chief economist of Zhixin Investment Research Institute. The PBOC may be constrained once the U.S. starts its rate hikes, but the central bank is expected to keep market rates stable by using short-term money market tools, the newspaper cited Lian as saying.
• China’s overall debt-to-GDP ratio may increase in the next few years as the government borrows to stimulate the economy while GDP growth fails to keep pace, Yicai.com reported citing a report by the Chinese Academy of Social Sciences. The so-called macro leverage ratio may rise to 268% in 2022 from the current 263.1%, the report said. The leverage ratio of Chinese residents has risen the fastest among the sectors, from less than 5% in 2000 to the current 62.2%, which has surpassed Germany and is closer to that of Japan, said the report. It warned that excessive debt of the U.S. households had led to the 2008 Great Financial Crisis.