MNI China Press Digest Aug 4: Yuan, PBOC, Project Construction

The following lists highlights from Chinese press reports on Thursday:

• The Chinese yuan is likely to remain stable by the end of August, with an average forecast of 6.75 against the U.S. dollar, compared with the 6.7434 on July 29, Yicai.com reported citing 17 economists it polled. Major non-U.S. currencies such as the euro and the yen may continue to weaken into August as the Federal Reserve’s aggressive rate hikes will support the dollar in the short term, Yicai said citing Lian Ping, president of Zhixin Investment Research Institute. These economists expect the yuan to strengthen to 6.68 against the dollar by the end of 2022, the newspaper said.
• The People’s Bank of China is unlikely to cut interest rates in the second half of the year amid the tightening of the global financial environment and rising domestic inflation, though a small cut to the reserve requirement ratio in Q4 cannot be ruled out, wrote Wen Bin, chief economist of Minsheng Bank in an article published by 21st Century Business Herald. The central bank will focus on guiding banks to increase lending, while maintaining ample liquidity and driving down the actual loan interest rate, said Wen. There is still room for the Loan Prime Rate to decrease, especially the five-year maturity, if consumption and investment are weaker than expected, said Wen.
• Major projects in serval provinces including Jiangsu and Zhejiang have received funding support from financial bonds by policy banks to accelerate construction, in a bid to help stabilize economic growth, Securities Daily reported. A total CNY300 billion of financial bonds approved earlier can leverage as much as CNY1.5 trillion supporting funds for project construction, the newspaper said citing Wang Qing, analyst with Golden Credit Rating. Coupled with CNY800 billion credit line of policy banks, this round of financial instruments can drive up to CNY2.6 trillion of incremental funds for projects in H2, the newspaper said citing Wang. Fixed-asset investment this year can be accelerated by about 4.8 percentage points from 2021’s 4.9% should the above policy tools are fully utilized, Wang was cited as saying.