China to continue prudent monetary policy

22/06/2016 02:13 AST

China plans opening measures that may allow foreign firms to list shares in the nation and will continue its “prudent” monetary policy this year, the People’s Bank of China said in its 2015 annual report released on Tuesday, echoing recent descriptions of its stance.

The central bank plans financial reforms including further opening up of the bond market and “two-way” opening of capital markets, according to a 133 page report reviewing 2015 and looking into this year.

Without giving a specific time frame, it said China plans to allow qualified foreign companies to issue stocks on the mainland.

The reiteration of a “prudent” monetary policy stance comes after recent economic data suggest a tepid stabilization in the economy, which last year expanded at its slowest pace in a quarter century.

The central bank is in the midst of a balancing act, tightening oversight of some financial products and seeking to keep a lid on debt growth while ensuring there’s enough credit supply to keep the economy humming.

In a written speech included in the report, the central bank’s governor Zhou Xiaochuan said the PBOC will continue to deepen financial reform and opening up in 2016, with special emphasis on assisting with structural reforms such as cutting excess capacity, destocking and deleveraging.

Meanwhile, the yuan extended declines at a 2014 low against a trade-weighted basket amid speculation the central bank was taking advantage of a sliding dollar to guide the currency weaker versus most peers.

A Bloomberg replica of the CFETS RMB Index dropped 0.2 per cent against the basket that includes the yen and euro on Tuesday, taking its three-day loss to 0.6 per cent. The People’s Bank of china set the reference rate 0.08 percent stronger, compared with a 0.7 per cent, two-day decline in the Bloomberg Dollar Spot Index. The yuan was little changed at 6.5815 as of 4:35pm in Shanghai, according to china Foreign Exchange Trade System prices.

For much of this year, the PBOC followed a dual strategy of allowing limited gains versus the dollar to combat capital outflows, and guiding depreciation against the currencies of trading partners, which helps exporters. That plan, aided by the greenback’s biggest decline since 2010 in the first quarter, was thwarted by a rebound in the dollar last month. The yuan has dropped almost 10 percent versus the basket since its August peak. An early indicator tracking China’s manufacturing sector showed activity contracted in June, indicating worsening conditions after official data for May showed signs of stabilisation.

The Gulf Today