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China’s Market News: Yuan Makes Progress in Settlement, Trading

China’s Market News: Yuan Makes Progress in Settlement, Trading

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.

- Bank of China (Hong Kong) completed the first Yuan cross-border transaction through CIPS on July 11th.

- CFETS issued the performance report for Yuan combination options over the first week of trading.

- PBOC removed cash from the market for the sixth consecutive day on Monday.

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China Finance Information: a finance online media administrated by Xinhua Agency.

- China’s Central Bank issued 30 billion Yuan of 7-day reverse repos on July 11th with an interest rate of 2.25%. After deducting the 90 billion Yuan of reverse repos maturing on the day, the net liquidity withdrawal was 60 billion yuan. This week, there will be a total of 195 billion Yuan of reverse repos to mature. Also, 127 billion Yuan of 3-month Medium-term Lending Facility (MLF) will mature on Wednesday and 100 billion Yuan of 6-month MLF will mature on Friday.

- Bank of China (Hong Kong), the Yuan clearing banking in Hong Kong, announced that the bank has completed the first cross-border Yuan transaction through Cross-border Interbank Payment System (CIPS). The CIPS is payment system which offers clearing and settlement services for cross-border Yuan payments and trade. It was established on October 8th, 2015 and is designated to compete with the US Dollar-backed SWIFT. Bank of China (Hong Kong) is the first Yuan clearing bank that China has set up in offshore markets. The completion of the Yuan transaction through CIPS marks a big step in the development of CIPS as well as in the Yuan’s globalization process. As of today, there are 19 financial institutions participating as CIPS members.

- China’s Finance Ministry and Commerce Ministry released a joint announcement regarding the government supporting projects in international trade. In terms of location, they will promote projects in the Mid-west region, where the development is much slower than in the East-Coast. In terms of industries, the Chinese government will support road transportation, electricity, communication facilities, aerospace and marine engineering firms to import advanced technology and equipment. Also, they will encourage e-commerce companies with overseas business to further expand their businesses in the international market. This announcement reveals China’s focus for the upcoming periods.

- The sales of renewable energy vehicles have increased by +126.9% to 170,000 over the first six months of 2016. Among all auto sales, sales of electric vehicles have increased the most, up by +161.6%. China’s renewable energy cars are developing rapidly thanks to the traffic and vehicle control policy in large cities. For instance, in Beijing, traditional engine cars are not allowed to be used one day per week based on the last digit of license plate numbers. During major events, such as the Olympic Games and APEC conference, the restriction will be tightened to every other day. Renewable energy automobiles are not subject to these same restrictions.

Hexun News: Chinese leading online media of financial news.

- The China Foreign Exchange Trade System (CFETS), the interbank trading division of the PBOC, released a performance report for Yuan combination options and pricing models which were launched on July 4th. Over the first week following the release, the trading volume of Yuan options increased by +93.86%. The top three combination option products that brought in the largest volume are Butterfly, Straddle and Strangle. Twenty-three financial institutions completed transactions over the past week.

- China’s Ministry of Finance released the third quarter report on public-private-partnership (PPP) projects. As of the end of June, the state agency has approved 232 projects with a total investment of 802.5 billion Yuan. 48.4% of the projects have entered the implementation phase. PPP refers to cooperation between government agencies and private companies on projects focusing on infrastructure and public services. Normally, PPP projects are funded by private companies and supervised by government agencies. Among all the projects, the participation rate of non-state-owned-enterprises was 45%; still a low level. Thus, over the following periods, the Chinese government will continue to promote private investment in the PPP projects.

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