Thursday, 13 December, 2018

China moves to boost liquidity amid US trade war

China,Trade wars,Beijing Asian shares fall as China set to reopen after Beijing eases policy
Ginger Lawrence | 10 October, 2018, 15:00

In June, the gap was more than 70 bps, and traders say any further narrowing could increase capital outflows from China.

"China's foreign-exchange reserves should decline given a stronger dollar and increasing depreciation pressures on the yuan, which could prompt the PBOC to intervene", said Ken Cheung, a senior currency strategist at Mizuho Bank Ltd. In a speech, U.S. vice-president Mike Pence said on Thursday that China's onshore stock market fell by 25% in the first nine months of the year because Washington "has been standing strong against Beijing's trade practices".

The ongoing trade war with the US has exerted great pressure on Chinese exports as rounds of retaliatory tariffs undercut China's price advantage. And on Friday, Chinese technology stocks listed in Hong Kong, including Lenovo and ZTE Corp, slumped on a Bloomberg report that the systems of multiple USA companies had been compromised by malicious computer chips inserted by Chinese spies.

Despite China's flagging economy, President Trump has rejected recent Chinese calls for negotiations over the trade dispute, claiming the offers are inadequate and that it is not the right time to make a deal. Shenzhen-listed shares of ZTE Corp tumbled more than 8 percent at market open, before paring losses.

'Unprecedented' climate steps are needed, United Nations says
The IPCC report also advises a shift to less energy-intensive household goods such as smart thermostats and air conditioners. Global warming of 1.5°C may force many marine species to relocate to higher altitudes and deal a blow to many ecosystems.

Real estate, consumer and healthcare sectors were also among the biggest casualties, all tumbling more than 4 per cent.

The People's Bank of China's move will release 1.2 trillion yuan in liquidity, with 450bn yuan of that due to offset maturing loans - meaning 750bn yuan will be injected into the financial system. However, it has since stabilized with the PBoC increasing liquidity support and maintaining ample liquidity. "Liquidity is not the issue". At its two-day meeting ending later on Wednesday, the Fed is expected to increase USA interest rates for the third time this year.

Yields of China's 10-year central government bonds have been trending lower this year, standing at 3.64 per cent at lunch break on Monday. At present, the interest rate on China's benchmark bond is about 60 basis points higher than on the USA one. Sydney retreated 1.4 percent, Singapore eased 0.5 percent, and Taipei and Seoul were each 0.6 percent lower. On Wednesday morning, the onshore spot yuan traded in a thin range of less than 60 pips. That was the biggest drop in nearly a month and led to the redback's lowest dollar value since May previous year.

"The ongoing China-US trade war is imposing headwind to China's growth, and monetary easing is being used to counter that", ChiXi Consultants said in a research note to its clients on Monday. Some market participants also said they were unwilling to hold large positions for their proprietary trade, amid global market uncertainty, during China's coming lengthy public holiday.