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MNI China Press Digest Sep 19: Yuan, Macro Leverage, A-shares

MNI summarises the key stories from the Chinese press.

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The following lists highlights from Chinese press reports on Monday:

  • The People’s Bank of China will monitor the yuan's trend, strengthen expectations management and curb speculation to keep the currency basically stable with two-way fluctuations rather than a “one-sided market”, CCTV News reported citing an unnamed source close to the central bank. The currency has strong support and a solid foundation for maintaining stability, the source was cited as saying. The CFETS yuan index, which measures the yuan's strength relative to a basket of currencies, is close to level seen in late 2021, the source added.
  • China should prioritize stabilizing growth rather than be concerned about a rapid rise in the macro leverage ratio (total debt/GDP) given the threat of a balance sheet recession, The Paper reported citing Zhang Xiaojing, director of the Chinese Academy of Social Sciences' Institute of Finance. Debt growth in the private sector is almost near record lows, while the total debt growth rate of the real economy has slowed to about 10% from past growth of 30-35%. Household sector debt growth has slowed to below 10% from a high of 50-60% in 2009, according to Zhang. The central government has a relatively low debt ratio and can issue more bonds, said Zhang.
  • China’s A-share market may rebound as the yuan weakens, the Chinese economy recovers and there is more clarity on geopolitical risks, the Securities Times reported citing analysts. The significant rebound in retail sales, coupled with a slowing decline in home sales, are positive signs at a time when policy stimulus is expected to increase, the newspaper said. The stock market may remain weak in the second half of September, but investors could enter the market in late October on clearer policy expectations, the newspaper said citing analysts from CITIC Securities.
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The following lists highlights from Chinese press reports on Monday:

  • The People’s Bank of China will monitor the yuan's trend, strengthen expectations management and curb speculation to keep the currency basically stable with two-way fluctuations rather than a “one-sided market”, CCTV News reported citing an unnamed source close to the central bank. The currency has strong support and a solid foundation for maintaining stability, the source was cited as saying. The CFETS yuan index, which measures the yuan's strength relative to a basket of currencies, is close to level seen in late 2021, the source added.
  • China should prioritize stabilizing growth rather than be concerned about a rapid rise in the macro leverage ratio (total debt/GDP) given the threat of a balance sheet recession, The Paper reported citing Zhang Xiaojing, director of the Chinese Academy of Social Sciences' Institute of Finance. Debt growth in the private sector is almost near record lows, while the total debt growth rate of the real economy has slowed to about 10% from past growth of 30-35%. Household sector debt growth has slowed to below 10% from a high of 50-60% in 2009, according to Zhang. The central government has a relatively low debt ratio and can issue more bonds, said Zhang.
  • China’s A-share market may rebound as the yuan weakens, the Chinese economy recovers and there is more clarity on geopolitical risks, the Securities Times reported citing analysts. The significant rebound in retail sales, coupled with a slowing decline in home sales, are positive signs at a time when policy stimulus is expected to increase, the newspaper said. The stock market may remain weak in the second half of September, but investors could enter the market in late October on clearer policy expectations, the newspaper said citing analysts from CITIC Securities.