China’s State Planner Vice Head says will actively expand domestic demand

China’s State Planner Vice Head:

• There is ‘sufficient’ room for counter-cyclical policy adjustments
• China has
  conditions, ability and confidence to achieve full-year growth target
• Will actively expand
  domestic demand, putting consumption boost in a more striking
  position
• will promote effective investment

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I think the reference to “counter-cyclical policy adjustments” is about the economy as a whole, Keynesian type poilices. But, since this is ForexLive, let me add this on the People’s Bank of China’s “Counter-Cyclical Factor”.

• Its is a mechanism introduced by the PBOC in 2017 to adjust the yuan’s central parity rate.
• The central parity rate is the daily reference rate set by the PBOC around which the yuan can fluctuate in a managed float system.
• The counter-cyclical factor is applied to this rate to counteract excessive market volatility or speculative movements.
• It allows the PBOC to moderate sharp movements in the yuan’s value that may not reflect underlying economic fundamentals.

The alternative, more forthright explanation is the CCF allows the PBOC to manipulate the yuan so it doesn’t, in the case of recent influences, collapse. You’ll note the reference set each day by the Bank is a LONG way from the market rate, in favour of the CNY (onshore yuan). This is the Bank propping it up.

Offshore yuan update

This article was written by Eamonn Sheridan at www.forexlive.com.