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China’s Market News: PBOC Addresses Yuan’s Recent Volatility

China’s Market News: PBOC Addresses Yuan’s Recent Volatility

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.

- The PBOC said no intention to devalue the Yuan in the effort of promoting trade.

- The non-performing loan ratio of Chinese listed banks is expected to increase to 1.8% in 2Q’2016.

- China’s foreign debt dropped 3.6% in the first quarter of 2016; reducing the risks of insolvency.

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PBOC News: China’s Central Bank.

- The PBOC issued an announcement on June 30th saying that ‘China has no intention to devalue the Yuan in the effort of promoting international trade. The global FX market saw high volatility of recent due to the Brexit decision and the Chinese Yuan has been devalued against the US Dollar to some extent. However, the Yuan has remained relatively stable to a basket of currencies.’ The PBOC’s commentary is a response to Yuan short-speculation of recent.

Hexun News: Chinese leading online media of financial news.

- The non-performing loan (NPL) ratio of listed commercial banks is expected to increase to 1.8% in the Second quarter of 2016 according to a report issued by Bank of China on June 30th. The growth in bank assets and liabilities in Q2 are expected to grow by 9.0% and 8.5% respectively. Also, the financial institution forecasted that the NPL ratio of listed banks will continue to rise in the third quarter, to 1.9%. In terms of economic forecasts, the bank said that China is still lacking momentum and thus they expect the growth rate in the second quarter to remain at 6.7%, the same as what was seen in the first quarter. The 2Q’2016 GDP print is scheduled to be released on July 14th (EDT).

Sina News: China’s most important online media source, similar to CNN in the US. They also own a Chinese version of Twitter, called Weibo, with around 200 million active usersmonthly.

- China’s local financial institutions forecast that China’s CPI in June may drop below 2%. According to China’s Commerce Department, the pork price, which contributed largely to earlier increases in CPI, saw drops in June, the first time this year. The pork price fell -1.0% on June 28 compared to a week ago. Also, the average price of 30 vegetables dropped -1.7% and the average of 6 fruits fell -0.2% over the same period. Both product groups are major contributors to China’s CPI. The consensus forecast for June CPI from Bloomberg is 1.9%. The inflation print is scheduled to be released on July 9th (EDT).

SAFE News: China’s foreign exchange regulator.

- As of the end of March, mainland China’s foreign debt balance dropped to 8.82 trillion yuan (approximately $1.36 trillion), falling -3.6% from the end of 2015. The decline in foreign debt also decelerated in the first quarter, decreasing by -3.8% from the decline in the last quarter of 2015. The foreign exchange regulator said that the insolvency risk is reduced and under control.

- The surplus in China’s current account in the first quarter of 2016 fell -54% to $39.3 billion compared to its 2015 number. The surplus in trade of goods dropped by -11% to $103.9 billion, driven by declining exports; the deficit in trade of services widened by 47% to $57.6 billion. This is mostly driven by overseas tours and studies performed by Chinese citizens. SAFE expected that over the following periods, China’s current account will remain positive, with a bigger surplus in trade of goods and a smaller deficit in trade of services.

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.

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