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PBOC sees renewed inflows
Source: Bloomberg News |
February 16, 2012, Thursday
|
Print Edition
Print Edition
CAPITAL flows into China have rebounded this year, the central bank said yesterday, adding to the case for officials refraining from making more cuts in banks' reserve requirements.
Expectations for a decline in the value of the yuan against the US dollar have also reversed, with non-deliverable forward contracts now forecasting no change or some appreciation, the People's Bank of China said in a quarterly monetary policy report. It didn't specify when the document was prepared.
China reduced the amount of money banks must set aside as reserves for the first time in three years in December as capital inflows dried up amid Europe's debt crisis, exacerbating a domestic credit crunch. UBS AG and Nomura Holdings Inc have scaled back forecasts for cuts after liquidity increased and the trade surplus surged.
"Large foreign-currency inflows may exert great influence on Chinese central bank monetary policy, and may reduce the likelihood of a cut in reserve requirements," said Liu Li-Gang, head of China economics at Australia & New Zealand Banking Group Ltd in Hong Kong, who previously worked at the World Bank.
Inflows this year, including a higher-than-forecast trade surplus, may also put "relatively large" appreciation pressure on the yuan, he said.
The country will see net inflows of capital this year, albeit at a lower level than previous years, as the nation maintains a trade surplus and the "vast potential" of its domestic market draws funds, the PBOC said.
The central bank said it will "closely monitor" the trend of rising capital inflows, including financial institutions' purchases of foreign exchange, and improve the flexibility of its policy adjustments.
Expectations for a decline in the value of the yuan against the US dollar have also reversed, with non-deliverable forward contracts now forecasting no change or some appreciation, the People's Bank of China said in a quarterly monetary policy report. It didn't specify when the document was prepared.
China reduced the amount of money banks must set aside as reserves for the first time in three years in December as capital inflows dried up amid Europe's debt crisis, exacerbating a domestic credit crunch. UBS AG and Nomura Holdings Inc have scaled back forecasts for cuts after liquidity increased and the trade surplus surged.
"Large foreign-currency inflows may exert great influence on Chinese central bank monetary policy, and may reduce the likelihood of a cut in reserve requirements," said Liu Li-Gang, head of China economics at Australia & New Zealand Banking Group Ltd in Hong Kong, who previously worked at the World Bank.
Inflows this year, including a higher-than-forecast trade surplus, may also put "relatively large" appreciation pressure on the yuan, he said.
The country will see net inflows of capital this year, albeit at a lower level than previous years, as the nation maintains a trade surplus and the "vast potential" of its domestic market draws funds, the PBOC said.
The central bank said it will "closely monitor" the trend of rising capital inflows, including financial institutions' purchases of foreign exchange, and improve the flexibility of its policy adjustments.
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