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MNI China Press Digest May 15: Yuan, Treasury, Risk Disposal

MNI (Singapore)
MNI (Beijing)

MNI picks key stories from today's China press

Policy NewsHomepageCentral Bank NewsPBOCAPACChinaStoryBond Market NewsEM Policy NewsEM Policy StoryEM Central Bank NewsPeoples Bank of ChinaPolicy StoryRegion
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Highlights from Chinese press reports on Wednesday:

  • The Chinese yuan will remain stable supported by the adequacy of foreign exchange policy tools and the firm attitude of policymakers in stabilisng the currency, China Securities Journal reported citing analysts. The market has priced in the Federal Reserve’s delayed rate cut, and the U.S. dollar may temporarily open up downside space should U.S. inflation data fall short of expectations, said Li Liuyang, foreign exchange expert at China International Capital Corporation. The continued economic rebound and net inflow of foreign capital in bond and stock markets will also support the yuan, the newspaper said citing analysts.
  • China’s plans to issue ultra long term special treasury bonds will further expand investment and consumption demand, with the potential for an additional 0.25 pp of GDP growth per year if the bonds stimulate CNY1 trillion of additional investment and consumption annually, according to Lian Ping, president of Guangkai Chief Industrial Research Institute. The bonds will act as a transfer payment to regional jurisdictions to alleviate local financial burdens and will promote high quality development through support for major national projects, Lian added. (Source: Securities Daily)
  • Authorities should enrich the funding sources for risk disposal of high-risk financial institutions, establish a multi-level fund guarantee mechanism and clarify the responsibilities and order of losses for different entities, 21st Century Business Herald reported citing an article by the National Financial Regulatory Administration. The newspaper noted the banking sector’s risk disposal incurred a large amount of bailout costs. The liquidation of Baoshang Bank caused CNY67.6 billion of deposit insurance funds in 2020, while Liaoyang Rural Commercial Bank drove CNY36.9 billion of costs in 2022. Out of 4,364 banking financial institutions 337 were reported in the “red zones” by Q2 2023, mainly city commercial banks and rural banks, a central bank report showed.
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Highlights from Chinese press reports on Wednesday:

  • The Chinese yuan will remain stable supported by the adequacy of foreign exchange policy tools and the firm attitude of policymakers in stabilisng the currency, China Securities Journal reported citing analysts. The market has priced in the Federal Reserve’s delayed rate cut, and the U.S. dollar may temporarily open up downside space should U.S. inflation data fall short of expectations, said Li Liuyang, foreign exchange expert at China International Capital Corporation. The continued economic rebound and net inflow of foreign capital in bond and stock markets will also support the yuan, the newspaper said citing analysts.
  • China’s plans to issue ultra long term special treasury bonds will further expand investment and consumption demand, with the potential for an additional 0.25 pp of GDP growth per year if the bonds stimulate CNY1 trillion of additional investment and consumption annually, according to Lian Ping, president of Guangkai Chief Industrial Research Institute. The bonds will act as a transfer payment to regional jurisdictions to alleviate local financial burdens and will promote high quality development through support for major national projects, Lian added. (Source: Securities Daily)
  • Authorities should enrich the funding sources for risk disposal of high-risk financial institutions, establish a multi-level fund guarantee mechanism and clarify the responsibilities and order of losses for different entities, 21st Century Business Herald reported citing an article by the National Financial Regulatory Administration. The newspaper noted the banking sector’s risk disposal incurred a large amount of bailout costs. The liquidation of Baoshang Bank caused CNY67.6 billion of deposit insurance funds in 2020, while Liaoyang Rural Commercial Bank drove CNY36.9 billion of costs in 2022. Out of 4,364 banking financial institutions 337 were reported in the “red zones” by Q2 2023, mainly city commercial banks and rural banks, a central bank report showed.