MNI EXCLUSIVE: Yuan, Finc'l Markets, Boosted By Deal: Advisors

     BEIJING (MNI) - The yuan should draw added strength from the signing of the

U.S.-China trade deal, which calls for the continued development of financial

markets, former Chinese officials and senior advisors told MNI Thursday.

     The deal will help China increase the transparency of the yuan forex

formation mechanism, said Sheng Songchen, former director of the statistics and

analysis department at the People's Bank of China, while a commitment to allow

asset managers to make purchases of Chinese non-performing loans should bring in

foreign expertise and capital as the country stabilises debt levels, assisting

the PBOC's risk prevention task.

     The yuan would remain strong in 2020, supported by continued growth above

6% and the cessation of trade hostilities, he said.

     Zhang Ping, a senior fellow at the Chinese Academy of Social Science, was

also upbeat about the yuan's prospects this year, adding that a weaker dollar

could also support the currency.

     But other officials said the yuan could still face volatility, although

within a fairly wide band, and with strong upside potential. Zhao Qingming, an

international finance expert, said that, barring any resumption of the trade

war, the yuan "would trade in a band of 6.5 to 7.1 and the dollar index would

fluctuate between 90 to 98."

     --TOUGHER PHASE TWO

     Although welcoming the deal's measures regarding the yuan, intellectual

property rights and tariffs, Sheng cautioned that the next phase of trade talks

could be more challenging.

     Phase two negotiations, which could involve the removal of all tariffs and

introduce issues more complicated than goods purchases, may not start for some

time, he said.

     Phase two topics would include the status of hi-tech companies, including

Huawei, along with reform of both the International Monetary Fund and the World

Trade Organisation, said Zhao.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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