MNI POLICY: China Yuan to Be Stable Around 7-to-Dollar: PBOC

     BEIJING (MNI) - The Chinese yuan will stay in a range around 7 to the

dollar with both upward and downward fluctuations as it is supported by economic

fundamentals as the country recovers from the coronavirus outbreak, Chen Yulu, a

deputy governor of the People's Bank of China, said at a press briefing Sunday. 

     China supports  multi-national organizations including the G20 and the

International Monetary Fund to coordinate policies and crisis supports, Chen

added after being asked whether China would join coordinated actions by central

banks such as the liquidity swap line set up to increase dollar liquidity.  

     PBOC Governor Yi Gang had spoken to Federal Reserve Chairman Jerome Powell,

along the heads of IMF and Bank of International Settlements, Chen said, without

divulging details of the discussions. 

     Chen was joined by Vice Chairman of the China Securities Regulatory

Commission Li Chao, China Banking and Insurance Regulatory Commission Vice

Chairman Zhou Liang and Xuan Changneng, deputy head of the State Administration

of Foreign Exchange. 

     - China's monetary policies will be more flexible, while M2 and social

financing will expand at a pace in line with "or even slightly higher" than

nominal GDP growth, Chen said. The central bank will target support at small

business lending, use capital injection and bonds to boost medium- and

small-sized banks and raise their willingness and capacity for lending, he said.

     - Inflation will gradually decline in Q2-Q4 as production recovers, Chen

said.

     - It is "too soon to judge" whether the world has entered a financial

crisis, as one needs to see whether markets experience an extended decline,

whether there have been closures of systemically important financial

institutions and whether the real economy sustained great damage, Chen said. 

     - China's economy has stabilized, and it has the strong credit market and

forex reserves to guard against the potential spread of global financial

turbulence, Chen said.

     - About CNY20 billion overseas capital left China this year, not enough to

cause overwhelming and fundamental impact. China's stock market faces less risks

due to lower valuations, with the P/E ratio of the Shanghai Composite Index at

less than 12; liquidity is also sufficient, said CSRC's Li.

     - SAFE eased controls on cross-border capital raising to allow companies to

borrow more from outside China, Xuan said. The so-called macroprudential

parameter was raised to 1.25 from 1, allowing wider access to tens of billions

of dollars more foreign funding, but the policy isn't available to local

government financing vehicles or property companies, said Xuan.

     - The CBIRC will further dissolve shadow banks and curb high-risk lending,

prevent property market speculation, Vice Chairman Li said. 

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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

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