MNI China Press Digest Dec 2: Yuan, H1 Easing, Moderate CPI

The following lists highlights from Chinese press reports on Thursday:

• The Chinese yuan, currently trading at a three-year high, may begin to lose steam from February through Q2, due to slowing exports, easing of domestic monetary policy and the expected strengthening of the U.S. dollar, the Securities Times reported citing analysts from CICC. Yuan may fluctuate around 6.6 on the dollar, supported by foreign investors’ demand for Chinese Government Bonds and possible economic rebound in H2 2022, the newspaper said. Though the yuan closed at 6.3535 against the dollar on Wednesday, the turning point is taking shape with the Federal Reserve tightening its monetary policy, the newspaper said.
• The People’s Bank of China is likely to cut reserve requirement ratios or even interest rates in the first half of next year, tilting monetary policy looser to help stabilize growth as signaled by the Politburo meeting this week, 21st Century Business Herald reported citing analysts. Currently, GDP growth is below the potential growth rate with inflation concerns eased, so stimulating demand is a necessary, the newspaper said citing Zhang Jiqiang, deputy research head of Huatai Securities. But the PBOC may not want to send too strong a loosening signal, and it may take time to cut interest rates before the U.S. enters an interest rate hike cycle in H2 2022, the newspaper said citing Zhang.
• China’s consumer prices are likely to show moderate increase next year, offering some space for monetary policy moves, China Securities Journal reported citing analysts. Higher production costs will be further reflected in the prices of consumer purchases while the price of pork, a major staple, also rises, the newspaper said citing Li Xuesong, a researcher at the Chinese Academy of Social Sciences. The gain in CPI is likely to remain moderate as consumption remains constrained by the pandemic, Li added. PPI is likely to moderate due to the decline in commodity prices and the high comparison base, said the journal.