The Chinese yuan is struggling for direction on Tuesday as investors anticipate critical economic data later this week. Monetary policy is also in focus for the global financial markets, with policymakers promising more flexible stimulus and relief measures for the world’s second-largest economy.
At a year-end meeting on Tuesday, the People’s Bank of China (PBoC) vowed to maintain flexible monetary policy to stabilize growth and lower financing costs for businesses. Chinese officials also promised to enhance oversight and enforcement of capital and platform businesses, especially in the real estate sector that had been bludgeoned by the Evergrande debacle.
Looking to 2022, the PBoC outline various policy tools it could utilize to ensure ample liquidity while also making sure that growth in the money supply mirrors nominal gross domestic product growth.
“A prudent monetary policy is flexible, reasonable and appropriate,” the central bank said in a statement. “The PBOC will effectively shoulder the responsibility of stabilizing the macro economy and pro-actively roll out monetary and financial policies that are conducive to economic stability.”
The further development and adoption of the digital yuan were also discussed.
On Thursday, the National Bureau of Statistics (NBS) will publish its crucial manufacturing and non-manufacturing purchasing managers’ index (PMI) for December. Last month, they barely expanded, leading to suggestions that the economy could experience a bout of stagflation.
The World Bank recently published a report that slashed the country’s economic growth, anticipating the GDP to grow 5.1% in 2022, down from 5.4%.
“Downside risks to China’s economic outlook have increased,” the World Bank said. “To achieve quality growth over the medium-term, China will need to rebalance its economy across several dimensions.”
Meanwhile, the Chinese yuan has enjoyed another impressive year, advancing about 2.5% against the US dollar.
The USD/CNY currency pair dipped 0.05% to 6.3682, from an opening of 6.3713, at 13:31 GMT on Tuesday. The EUR/CNY tumbled 0.21% to 7.2021, from an opening of 7.2165.