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MNI China Press Digest November 1: Yuan, Shenzhen, RMB Bonds

MNI (Singapore)
MNI (Beijing)

MNI summarises the key stories from the Chinese press.

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The following lists highlights from Chinese press reports on Tuesday:

  • The yuan may endure short-term depreciation pressure as the Federal Reserve continue to hike rates, while China's weak exports, Covid disruptions and real estate downturn also weigh on the currency, Yicai.com reported citing analysts. Nomura foreign exchange strategist Craig Chan maintained his forecast for yuan to weaken to 7.5 against the U.S. dollar by the end of November, rather than forecasting additional weakness as he suspects the People's Bank of China may intervene. Though the State Administration of Foreign Exchange is unlikely to use FX reserves to intervene, state-owned commercial banks may enter the market to support the yuan with their large foreign exchange holdings estimated to total USD629 billion, the newspaper said citing Lu Ting, chief economist at Nomura China.
  • China's Ministry of Finance will support Shenzhen as it explores innovative fiscal policy and new management systems through measures to help the city meet housing demand and increase its local government bond issuance, according to a document released on the ministry's website. The central government will increase subsidies for the construction of affordable housing in Shenzhen from the central budget given the city's growing population, the document said. It will actively support new bond sales by Shenzhen to promote investment, and explore the establishment of a government debt repayment reserve system to prevent default risks.
  • There were net purchases of domestic yuan bonds by foreign investors in October, reported financial news agency Cls.cn citing a source close to the State Administration of Foreign Exchange. China’s bond market has not endured the volatility witnessed in large global bond markets, with the 10-year China Government Bond yield fluctuating within a narrow range, which underscored its attractiveness to foreign investors, the source said. There was potential for increased foreign investment in yuan bonds given the prospect of economic recovery and the opening up of China's financial market, the source said.
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The following lists highlights from Chinese press reports on Tuesday:

  • The yuan may endure short-term depreciation pressure as the Federal Reserve continue to hike rates, while China's weak exports, Covid disruptions and real estate downturn also weigh on the currency, Yicai.com reported citing analysts. Nomura foreign exchange strategist Craig Chan maintained his forecast for yuan to weaken to 7.5 against the U.S. dollar by the end of November, rather than forecasting additional weakness as he suspects the People's Bank of China may intervene. Though the State Administration of Foreign Exchange is unlikely to use FX reserves to intervene, state-owned commercial banks may enter the market to support the yuan with their large foreign exchange holdings estimated to total USD629 billion, the newspaper said citing Lu Ting, chief economist at Nomura China.
  • China's Ministry of Finance will support Shenzhen as it explores innovative fiscal policy and new management systems through measures to help the city meet housing demand and increase its local government bond issuance, according to a document released on the ministry's website. The central government will increase subsidies for the construction of affordable housing in Shenzhen from the central budget given the city's growing population, the document said. It will actively support new bond sales by Shenzhen to promote investment, and explore the establishment of a government debt repayment reserve system to prevent default risks.
  • There were net purchases of domestic yuan bonds by foreign investors in October, reported financial news agency Cls.cn citing a source close to the State Administration of Foreign Exchange. China’s bond market has not endured the volatility witnessed in large global bond markets, with the 10-year China Government Bond yield fluctuating within a narrow range, which underscored its attractiveness to foreign investors, the source said. There was potential for increased foreign investment in yuan bonds given the prospect of economic recovery and the opening up of China's financial market, the source said.