The Chinese yuan is weakening against its US peer in the middle of the trading week as the nation’s central bank revealed that it would not be exiting from monetary stimulus anytime soon. This comes as officials and media have been giving the public mixed messaging on what monetary policy could look like in 2021.
Speaking on a panel hosted by the World Economic Forum, People’s Bank of China (PBoC) Governor Yi Gang stated that the institution will not exit “prematurely” from its supportive monetary policies. Yi did say, however, that the central bank would try to keep debt risks under control.
Yi noted that he understands the risks involved with the aggressive monetary policy stance over the last year, something that has triggered rising macro leverage ratio and soaring non-performing loans.
“Looking forward, I think our monetary policy will continue. We will keep a delicate balance between supporting the economic recovery, at the same time, preventing risk. We will ensure that policy is consistent and stable and will not exit from supporting policy prematurely.”
These remarks echo what he recently stated at a virtual conference hosted by Hungary’s central bank.
Put simply, the PBoC is not changing its policy stance anytime soon.
This has weighed on the yuan this week, particularly after the central bank removed approximately $12 billion from the banking system earlier this week. This was also followed by the roughly $15 billion in a liquidity drain last week.
On the data front, year-to-date industrial profits climbed 4.1% year-over-year in December, according to the National Bureau of Statistics (NBS). The biggest profit-generating industries were chemical products (20.9%), metal smelting and rolling processing (20.3%), communications (17.2%), general manufacturing (13.0%), automobile (4.0%), electrical machinery (3.4%), and non-metallic mineral products (2.7%).
The USD/CNY currency pair jumped 0.28% to 6.4836, from an opening of 6.4652, at 14:37 GMT on Wednesday. The EUR/CNY decreased by 0.37% to 7.8332, from an opening of 7.8614.