MNI EXCLUSIVE: Yuan To Consolidate 2020 Gains: Advisor

The yuan may be entering a period of stability against the dollar following its appreciation last year, as economic growth balances the impact of a probable rebound by the greenback, Yan Feng, a member of the Chinese People's Political Consultative Conference and the Hong Kong-based chairman of Guotai Junan Securities, told MNI.

Policy makers would also prefer a more stable currency, Yan said in an interview on the sideline of the National People's Congress, noting that a steady yuan will help attract foreign investment to China.

While the dollar should strengthen broadly as the U.S. returns to growth, China's economy could expand by much more than the 6% target laid out in Premier Li Keqiang's government work report last week, said Yan, a member of a body that selects Hong Kong's chief executive. The premier told policymakers including Yan that the government had chosen to set a growth goal that was conservative. His comments echo those of other state advisors to MNI in recent days.

FLOWS

A significant part of foreign investment flows into China are channelled through Hong Kong, and the financial centre should also benefit if China's proposed "southbound trading" of the bond-connect program is approved, Yan said. The much-anticipated liberalisation would allow mainland institutions to invest in overseas bond markets, further opening up mainland financial markets and promoting yuan internationalisation, he said.

Measures by China to modify Hong Kong's electoral system following last year's passing of the national security law will not erode Hong Kong's status as a global financial hub, said the Beijing-born Yan, who has lived in Hong Kong for decades.

"The impact is temporary," Yan said, "Hong Kong will be an open Hong Kong, I believe people will take advantage of the opportunities to make money."

Many more Chinese companies are also seeking to list in Hong Kong, he said. Chinese companies already account for about 80% of the value of the Hong Kong Stock Exchange.