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Chinese push to have yuan included in SDR currency basket

• THE AUSTRALIAN
  
• OCTOBER 05, 2015 12:00AM
  

Scott Murdoch
[Image: scott_murdoch.png]
China Correspondent
Beijing

[Image: 789653-5c6da6b4-6a75-11e5-9bb9-94d25a90b8df.jpg]
Beijing’s move would increase liquidity in the yuan. Source: AFP
[b]The Chinese yuan could become the next global reserve currency, after the People’s Bank of China intervened in the offshore trading markets in a move interpreted by analysts as designed to win favour with the International Monetary Fund.[/b]
The IMF is due next month to publish the results of its five-year review of the Special Drawing Rights currency basket, currently consisting of the US dollar, the British pound, the euro and the Japanese yen. China has been campaigning to have the yuan included for the first time as part of its push to make its currency international.
The PBOC last week plunged into the offshore Chinese yuan (CNH) market to reduce the spread it was trading at compared with the onshore Chinese yuan (CNY) which blew out to more than 1000 points after the PBOC ordered a string of depreciations in August.
Commonwealth Bank foreign exchange analyst Andy Ji said the PBOC decision to intervene in the CNH was surprising and investors were now watching the PBOC’s moves closer than ever.
“The PBOC is believed to have expanded its intervention to offshore,” Mr Ji said in a research note. “The spread between onshore and offshore widened immediately after the devaluation move but has all since disappeared. It appears the central bank remains determined to maintain a total realignment of fixing (in) on and offshore markets. Market participants are increasingly concerned with the sustainability of such aggressive interventions, in particular in the offshore renminbi (yuan) markets.”
China allows the yuan to move within a 1 per cent trading bracket each day and the devaluation in August caught financial markets by surprise.
The CBA’s head of RMB solutions, Sangeeta Venkatesan, said it was becoming more likely the yuan could be included in the SDR basket after the string of PBOC and Chinese government decisions over the past few months.
Analysts believe the CNH intervention last week was timed to coincide with Chinese President Xi Jinping’s US visit and meetings with President Barack Obama. The US has persistently criticised China for keeping the yuan low to give the nation’s exports an advantage over the rest of the world. The Chinese government has also promised to make the yuan more convertible as part of its campaign to the IMF.
“If you had asked me eight months ago whether the yuan would be an SDR currency I would have said that it would be surprising,” Ms Venkatesen said . “But the Chinese central bank has been taking the right moves and opening up its capital account. Now it would not come as a surprise.”
Ms Venkatesen said the SDR inclusion would increase the liquidity and trading volumes in both onshore and offshore yuan markets and use of the Chinese currency would likely become more common.
The agreement signed in 2013 to make the yuan and the Australian dollar fully convertible and the establishment of Sydney as a yuan trading hub has not prompted a long-term increase in trade deals between the two countries to be settled in yuan.
“If you look at it from a commercial point of view, Australia’s largest trade partner is China but most companies are still using US dollars,” Ms Venkatesen said.
“It (SDR) could increase the corporate appetite to use yuan. We could also start to see Chinese companies asking for trade deals to be settled in yuan rather than US dollars so it would be good for Australian companies to be ready for that.”
The PBOC flagged on the weekend it would push ahead with plans to curb speculative traders, hoping this will maintain stability in the currency. Deputy governor Yi Gang wrote in China Finance magazine the bank and government authorities still wished to work towards making the yuan fully convertible under the nation’s capital account, as it was under the current account.
Additional reporting: Agencies

We haven't know the fates of TPP and RCEP yet. The front-runner isn't always mean winner at the finish line.

China-backed trade pact playing catch-up after US-led TPP deal

SEOUL — Left out of the United States-backed Trans-Pacific Partnership (TPP) trade pact struck last week, China and India approach this week’s talks on a huge Asia-wide equivalent with fresh urgency, lest competitor nations steal a march on export access.

Beijing is a key driver of the Regional Comprehensive Economic Partnership (RCEP), a proposed 16-nation free-trade area that would be the world’s biggest such bloc, encompassing 3.4 billion people.

“Member countries will be under pressure to fast-track negotiations for RCEP,” said a senior official in India, which is keen to avoid being excluded from major trade accords.

While China’s rivalries with India and Japan will complicate progress, it has incentive to get things moving.

China’s central bank estimates the world’s second-largest economy could forfeit a 2.2 per cent boost to gross domestic product if Beijing does not join the TPP, according to a commentary by the bank’s chief economist Ma Jun published in the official Shanghai Securities News on Friday.

China stands to lose ground to manufacturing competitors such as Vietnam which, as a TPP member, will have greater duty-free access to the US and other member nations, said Mr Tu Xinquan, a professor at the University of International Business and Economics in Beijing.

“It’s not that there is competition between the RCEP and the TPP, but overall, because of the pressure put on by the TPP, there’s hope for a faster end to negotiations for more liberalised trade in the region,” Mr Tu said.

The RCEP was first conceived by the 10 members of the Association of Southeast Asian Nations (ASEAN), but China is increasingly prominent as a backer of the proposed pact.

While the RCEP has largely been seen as an alternative to US-led trade plans, some say that view is evolving.

China may ultimately look to steer RCEP talks towards a broader pact that would encompass TPP into a Free Trade Area of the Asia-Pacific, said Mr Kim Young-gui, head of regional trade studies at the Korea Institute for International Economic Policy in Seoul — an idea first put forward by the Asia-Pacific Economic Cooperation grouping.

Seven countries — Australia, Japan, Malaysia, New Zealand, Singapore, Vietnam and Brunei — are in both the TPP and the RCEP.

“New Zealand views TPP and RCEP as complementary stepping stones to the vision of a Free Trade Area of the Asia-Pacific,” said a Ministry of Foreign Affairs and Trade spokesperson.

The TPP deal, reached on Oct 5 after marathon talks between the US and 11 Pacific Rim nations, aims to liberalise commerce in 40 per cent of the world’s economy and would be a legacy-defining victory for President Barack Obama.

Mr Obama wants the TPP to help boost US influence in East Asia and counter the rise of China, but Beijing officially welcomed the pact, saying it hoped the deal would promote Asia-Pacific trade.

“We hope that regardless of whether it is the TPP or the RCEP, they both can supplement, promote and be beneficial to strengthening the multilateral trade system,” said Chinese Foreign Ministry spokeswoman Hua Chunying.

Prime Minister Shinzo Abe of Japan, a key player in the TPP, held out the prospect of bringing China into the deal in future, saying it would increase the pact’s strategic significance and improve regional stability.

Washington does not dismiss the possibility, though China would need to undertake reforms to meet the standards of commerce envisioned by the TPP.

“It is not designed to encircle China,” Deputy US Secretary of State Antony Blinken said in Seoul last week when asked if Washington sees the TPP deal as a way to check China. “To the contrary, if China is interested in pursuing membership and it is able to meet the standards, we would welcome that.”

Those standards include minimum labour rights and principles for currency management that the RCEP is unlikely to demand of Beijing.

A Japanese Foreign Ministry official said the TPP would accelerate the pace of the RCEP and could have some impact on “raising the level of the outcome of the negotiations”, but the “very diverse group” had different ideas on what might be desirable.

The 16 RCEP countries will present their offers for market opening when they meet in Busan in South Korea today, with an aim to make “best efforts” towards reaching agreement by the end of the year, a South Korean official close to the negotiations said.

Negotiators are expected to share their lists of offers for tariff reductions on goods and service sectors.

Dr Song Yeong-kwan, a research fellow at the state-run Korea Development Institute, believes agreement remains years away. “Some countries have tensions with China, so it will not be easy, and the process could be a bumpy ride,” he said. REUTERS
http://www.todayonline.com/world/asia/ch...epage=true

One day, PBOC may be having the same weight as Fed, in the eye of global market players  

China stocks jump after PBOC says correction "almost over"

SHANGHAI (Oct 12): China shares jumped over 3% on Monday to their highest level in seven weeks after the central bank took fresh steps to inject liquidity into the struggling economy and said the stock market's correction "is almost over".

Investors were also in a buying mood ahead of the 13th five-year economic plan to be announced later this month, expecting stimulus and other growth measures.

Hong Kong stocks were firmer too, extending last week's 4.4% rebound on subdued expectations of a US rate hike this year and a recovery in global commodity prices.

On the mainland, the CSI300 index rose 3.5% to 3,458.08 points by midday, while the Shanghai Composite Index gained 3.4% to 3,290.62 points.
...
http://www.theedgemarkets.com/sg/article...lmost-over

Jim Chanos: Playing Shanghai Market Is Like a Casino
http://www.bloomberg.com/news/videos/201...e-a-casino

China imports slump 17.7pc in September

• MARK MAGNIER
  
• THE WALL STREET JOURNAL
  
• OCTOBER 13, 2015 3:54PM
  

[b]China’s exports and imports fell in September as global demand remained weak, signalling that the world’s second-largest economy continues to struggle into the end of the year.[/b]
Exports dropped less than some economists had expected. Still, they said the data offered a further indication that China’s third-quarter growth figures set for release next week will likely fall below Beijing’s target of about 7 per cent for the whole year.
“Exports in September look a little better than expectations,” said HSBC economist Ma Xiaoping, adding that year-end trade figures tend to pick up due to Christmas shipments. “But if you factor in seasonal factors, I don’t see much improvement in global demand,” she added.
According to the General Administration of Customs, Chinese exports fell 3.7 per cent in September from a year earlier in US dollar terms following a 5.5 per cent drop in August.
Imports in September fell 20.4 per cent in US dollar terms from a year earlier, compared with a 13.8 per cent decrease in August, the customs agency said.
Imports fell 17.7 per cent in yuan terms, compared with a forecast fall of 16.5 per cent.
The country’s trade surplus increased to $US60.3 billion in September from $US60.2 billion in August, the agency said.
China’s September exports continued to struggle against weak global demand. The International Monetary Fund expects the world’s economy to grow 3.1 per cent in 2015, its slowest pace since the global financial crisis. That represents a downgrade from the IMF’s 3.3 per cent growth forecast in July.
China’s exports were significantly better than in neighbouring Taiwan and South Korea, both of which weathered a sharp export drop in September, signalling that China is holding its own in a weak market, economists said. “This shows the competitiveness of Chinese exports,” said Mizuho economist Shen Jianguang.
Huang Songping, a spokesman with the General Administration of Customs, said in a briefing that China’s exports are expected to return to growth in the fourth quarter after falling in the second and third quarters. The decline in Chinese imports is likely to narrow in the final quarter, Mr Huang added, citing a raft of measures rolled out by Beijing in recent weeks, including easier procedures and reduced taxes aimed at improving trade.
Growth-hungry global economies have been concerned about China’s outlook after a stockmarket slump and unexpected currency depreciation this summer rattled global markets. Beijing has cut interest rates five times since November, reduced required bank reserves repeatedly and stepped up government spending in a bid to boost growth, so far with limited results.
Chinese exports, once a primary growth engine for the economy, have faced more headwinds from higher labour and land costs and the rise of low-end competitors in Southeast Asia.
Economists said exports last month would probably have been stronger if it weren’t for an explosion at the northern port of Tianjin in August and the temporary closing of factories ahead of a September military parade in Beijing aimed at reducing air pollution.
China is likely to miss its 2015 foreign trade target of 6 per cent year-over-year growth, down from the 7.5 per cent growth targets it set in 2014 and 8 per cent in 2013, both of which it failed to reach, economists said.
Today’s export data are the latest in a parade of weak economic numbers out of China in recent weeks. The nation’s official purchasing managers index contracted in September for the second month in a row, foreign-exchange reserves fell by more than $US40 billion last month and the real-estate industry continues to struggle.
In addition, China’s crude imports rose in September to 27.95 million tonnes, compared with 26.59 million tonnes in August. So far in 2015, crude imports are up 8.8 per cent to about 249 million tonnes.
Wall Street Journal

China inflation rate slows to 1.6pc

• AFP
  
• OCTOBER 14, 2015 2:06PM
  

[Image: 860463-692986da-7221-11e5-87c5-82c509632f8f.jpg]
Shoppers in a mall in Yinchuan in north-western China's Ningxia Hui autonomous region. Source: AP
[b]China’s consumer inflation fell in September, underlining sagging sentiment as growth slows in the world’s second-largest economy.[/b]
Chinese expansion slowed to its lowest rate in nearly a quarter of a century in 2014 and has continued to weaken this year with demand remaining subdued.
The country’s consumer price index — a main gauge of inflation — rose 1.6 year-on-year in September, the National Bureau of Statistics said, down from August’s 2.0 per cent. The producer price index, which measures the cost of goods at the factory gate, fell 5.9 per cent year-on-year in September, matching August’s figure, which was a six-year low.
Moderate inflation can be a boon to consumption as it pushes buyers to act before prices go up, while falling prices encourage shoppers to delay purchases and companies to put off investment, both of which can hurt growth.
Consumer inflation has been at or below 2.0 per cent for all of 2015, while the drop in PPI — a leading indicator for CPI — was the 43rd consecutive monthly fall.
Chinese growth hit a 24-year low of 7.3 per cent in 2014 and has slowed further this year, with gross domestic product increasing 7.0 per cent in each of the first two quarters.
Both domestic and overseas demand have slackened, while the key property market has also weakened, hitting demand for construction materials.
Plants — many of them state-owned — are loath to drastically cut employees, leading to continued production even when demand is weak, putting more pressure on prices.
The International Monetary Fund last week warned that China could be headed for a hard landing unless leaders get a grip on the current economic challenges.
AFP

The equivalent of US Treasury Bond? London is the first outside greater China, and not in Singapore...

China planning first sale of yuan sovereign bonds in London: sources

BEIJING (Oct 14): China plans to issue yuan-denominated sovereign bonds in London for the first time as it seeks a greater role for its currency in global trade and finance, according to people familiar with the matter.

The sale would be the first offshore issuance of the notes outside of Hong Kong and is expected to take place after the People's Bank of China sells one-year bills in the UK capital, said the people, who asked not to be named as the proposal has yet to be announced. The central bank's offering, which is being arranged by Industrial & Commercial Bank of China and HSBC Holdings ( Valuation: None, Fundamental: None), is due to take place by early November.

"It's time for China to broaden the sovereign bond market beyond Hong Kong," said Ngan Kim Man, deputy head of treasury at China Everbright Bank Co.'s Hong Kong branch. "It's quite a natural move and can bolster yuan usage in Europe. It's part of the yuan internationalization strategy."
...
http://www.theedgemarkets.com/sg/article...on-sources

(All defaulted???)

Global Wealth (Beijing) Investment Co. Ltd., an asset management firm, has lent out about 630 million yuan from about 660 investors to companies backed by Hebei Financing's guarantees. All those companies have defaulted on their debt,

Loan Crisis in Hebei Gets Worse with Executive's Stabbing
http://english.caixin.com/2015-10-14/100862956.html

(15-10-2015, 10:02 AM)Behappyalways Wrote: [ -> ](All defaulted???)

Global Wealth (Beijing) Investment Co. Ltd., an asset management firm, has lent out about 630 million yuan from about 660 investors to companies backed by Hebei Financing's guarantees. All those companies have defaulted on their debt,

Loan Crisis in Hebei Gets Worse with Executive's Stabbing
http://english.caixin.com/2015-10-14/100862956.html

Yes, very interesting, all defaulted? It is more like "free money" from the asset management firm?

The truth behind China's manipulated economic numbers
http://www.telegraph.co.uk/finance/econo...mbers.html