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Chinese Media Addresses BoJ's Move to Negative Rates

Chinese Media Addresses BoJ's Move to Negative Rates

Renee Mu, Currency Analyst

This daily digest focuses on market sentiment, new developments in China’s foreign exchange policy, changes in financial market regulations and Chinese-language economic coverage in order to keep DailyFX readers up-to-date on news typically covered only in Chinese-language sources.

- Chinese media made comments that the Yuan has no need to depreciate following the BoJ’s decision.

- The January CFETS Yuan Index indicates the currency is stable relative to a basket of currencies.

- Building free trade zones has become a popular strategy for local governments to stimulate the economy.

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Xinhua News: Chinese government’s official news agency.

After the Bank of Japan surprisingly announced negative interest rates on Friday, Xinhua News published a series of articles regarding the issue.

- On January 29, right after the BOJ’s decision, the news agency published an article - BOJ Introducing Negative Interest Rates, Too Surprised. The article mainly provided facts such as the decision process, BOJ’s targetinflation, and comments quoted from foreign media. It didn’t include much opinion from the author or the news agency itself.

- On January 30, Xinhua News published an English article: BOJ’s surprising steps stopgap antidote to domestic woes, may spark broader devaluations. The title is fairly descriptive of the article itself.

- On February 1, the news agency published another piece with an even clearer tone: Within a growing theme of Fed rising rates and China’s economic slowdown, Japan’s negative interest rates policy may trigger global-wide currencies’ competitive devaluation. However, as the Chinese economy will recover in the long run, the Yuan will not need to follow Yen’s pace of devaluation.

- Economic Information Daily, a news media administrated by Xinhua News, published an article on the same day, saying the BOJ’s ‘negative interest rates’ may have more symbolic meaning. In the article, the author discussed the background of the BoJ introducing this rate cut and questioned whether it can bring real benefit to the Japanese economy.

People’s Bank of China: China’s Central Bank.

- On Monday, the PBOC released a report on the CFETS Yuan Index. The Yuan Index on January 29 was 100.15, with a small drop of 0.78% from the last reading. In January, the Chinese Yuan lost 0.98% and 1.30% against the euro and the US dollar respectively, while appreciating against the Korean Won and South African Rand, which are all included in the basket of currencies. After being weighted bytrade volume, the Yuan Index remains stable around 100. This indicates that the Yuan is relatively stable to a basket of currencies.

China Stock News:Chinese leading online media of financial news

- Establishing free trade zones has become a popular strategy for the Chinese local governments. In the past month, 21 provinces, municipalities and autonomous regions have submitted applications to build free trade zones. The number of applications increased sharply, rising from less than 10 in the whole year of 2015. Free trade zones can usually receive favored policies compared to the rest of the country. As China’s growth has begun to slow, local regions are eager to develop free trade zones which can be a proactive way to stimulate local economies.

- As of January 30, all the companies listed on Small and Medium Enterprises (SME) board and Growth Enterprises Market (ChiNext) board have disclosed their predicted earnings in 2015 through annual reports or other performance reports. The average profit in 2015 predicted by 1269 firms is over 100 million yuan. In terms of industries, internet, environmental protection, entertainment and electrical machinery industries have the highest growth.

- Overall tone on the stock market from China Stock News: Mixed.

Written by Renee Mu, DailyFX Research Team

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.