MNI China Press Digest Nov 24: Strong Yuan, RRR Cut, PPI Ease

The following lists highlights from Chinese press reports on Wednesday:

• China's trade surplus and foreign capital inflows are supporting the yuan despite the rising U.S. dollar index, wrote Guan Tao, chief global economist of BoC International and a former forex official in a commentary published by the Economic Daily. The China-U.S. interest spread continues to attract foreign capital with the inflows under Bond Connect and Stock Connect amounting to CNY580.6 billion in Jan-Oct, a rise of 40% y/y, said Guan. The trade surplus this year is set to break a record as it already rose 36.6% y/y to USD510.63 billion in the first ten months in favour of China, said Guan. Guan noted that a considerable part of the trade surplus has turned into corporate FX deposit holdings, and financial institutions should help them invest with FX deposits, so to avoid the risk of yuan overshooting due to concentrated FX settlement at year-end, the newspaper said.
• Expectations are growing that China will ease policy, including a reserve requirement ratio cut in Q4, Yicai.com reported. Policymakers have been fine-tuning policy to prevent a further economic slowdown since October and Q4 will be the window period for a 50-basis point RRR cut, the newspaper said citing Ding Shuang, Standard Chartered Bank's chief Greater China & North Asia economist. Lu Ting, chief economist with Nomura China also expects monetary easing and fiscal stimulus will soon increase, with rising possibility of RRR cut in the next few months, as policymakers focused on stabilising growth and employment at a recent meeting. But major measures to control debt-raising by developers won't be relaxed and the central bank may take certain measures if the yuan continues to strengthen, the newspaper said citing Lu.
• China's PPI will likely ease in November from the over 26-year high of 13.5% in October as domestic coal prices lead a decline in industrial product prices, the China Securities Journal reported citing Wang Qing, chief analyst at Golden Credit Rating. The prices of domestic steel, aluminum, glass and methanol have fallen significantly, and the rising pressure of some raw materials prices has been largely eased, the newspaper said. Globally, the prices of most commodities, except for energy products, will continue to fall in Q4 and Q1 next year with the supply gradually recovering, and probably register negative year-on-year growth in Q2 on high comparison bases, which may sharply drive down factory-gate prices globally, the newspaper said citing Zhao Gongzheng, director of the International Division of the Price Monitoring Center, NDRC.