MNI POLICY: Yuan Strength In 2020 "Moderate"-PBOC Official

China's robust recovery has fueled a "moderate" appreciation of the yuan and will help provide conditions for stabilising the economy's leverage ratio at a reasonable level, People's Bank of China officials told reporters Wednesday.

The yuan's 3.3% rise against the dollar so far this year reflects benign economic fundamentals, said Sun Guofeng, head of the monetary policy department. Orderly capital inflows and wide interest spreads with other major economies as China maintains monetary policy at normal settings have also contributed to the currency's "moderate" advance, said Sun.

But authorities will prevent any excessive fluctuations in the level of the yuan, he said, adding that the PBOC will ensure a flexible exchange rate and stabilise market sentiment. The central bank will maintain a prudent monetary policy stance, taking targeted measures to boost lending to the real economy while limiting risk at a time when the international environment remains challenging.

The PBOC will provide ample levels of liquidity via tools such as its medium-term lending facility, but will avoid "flood-like" stimulus, Sun stressed, noting that current money market lending rates, guided by policy rates, are in line with fundamentals at a time when recovery is on track.

Ruan Jianhong, head of PBOC's statistics department, said the economy's overall leverage should be allowed to rise, in order to allow funding for anti-pandemic controls and to boost the economy.

Q3 GPD data will be better than Q2's, Ruan said, helping to keep debt at a reasonable level relative to output.

Assistance from financial institutions, which have lowered loan rates and allowed borrowers to defer payments on principle and interest, saved companies over CNY1 trillion in the first eight months of the year, Sun said. The saving should total CNY1.5 trillion during all of 2020.

Peng Lifeng, deputy director of the PBOC's financial markets department, said banks has deferred interest and repayments of principle on as much as CNY3.7 trillion of loans as of the end of August.