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Chinese Currency Support Likely, Experts says

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Chinese currency support likely, experts say

Chinese has been able to maintain its own monetary easing cycle amid concerns about tightening global financial currency conditions and will inject momentum into the world economy, experts said on Thursday.

China's central bank, the People's Bank of China, may still cut interest rates in the near term, even though the Federal Reserve said on Wednesday it was planning a tightening in March.

Wang Qian, chief economist for Asia Pacific at Vanguard Group, said that while much of the world is starting to curb economic stimulus to curb inflation, China is ready to add fuel to its economy, which will partially offset the tightening of global markets. developed economies.

Wang said she expects the central bank to move ahead with easing measures to ensure the policy effects are felt later this year and offset the impact of a slowdown in the real estate sector, COVID-19 cases and external uncertainties.

The comments came after geopolitical tensions and a convergence of austerity plans by major central banks that could weaken global financial markets and derail the global economic recovery.

Federal Reserve Chairman Jerome Powell told the U.S. Congress on Wednesday that he plans to propose a quarter-point rate hike this month, while noting that geopolitical tensions could have a highly uncertain impact on the U.S. economy.
Wu Chaoming, vice president of Chase Research Institute, said that despite the imminent Fed rate hike, China's central bank still has room to cut interest rates on its medium-term lending facility policy in the coming months.

"Because of China's huge economy and strong yuan, Chinese's monetary policymaking dominates the domestic economic situation, rather than other actions by the central bank," Wu said.

The onshore yuan's central parity against the dollar posted its biggest gain in seven months on Thursday, reaching 335 basis points to 6.3016, taking the year-to-date gain against the dollar to 741 basis points, according to data from the China Foreign Exchange Trading Center. .

China's moderately loose monetary environment will not only help to consolidate the initial stability of the domestic economy, but also help support the global economy by boosting Chinese's demand for external goods and services, Wu said.

David Blair, vice-president and senior economist at the Center for China and Globalization, said central banks have been "responsible" in their response to the COVID-19 pandemic by avoiding excessive stimulus to push up debt levels, which also helped maintain Global financial stability.

The central bank said on Thursday that Chinese is confident to "hold the bottom line of avoiding systemic financial risks" after seeing financial risks gradually waning and macro leverage falling to 272.5 percent by the end of last year.

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