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Chinese Yuan Posts Modest Gains As Beijing Begins Stimulus

December 19, 2018 at 19:11 by Andrew Moran

Chinese 100-yuan notesThe Chinese yuan is posting modest gains against some of its currency rivals after the federal government started to launch several aspects of its stimulus program this week. Experts do believe that the yuan will rebound next year, especially if the US and China are able to reach a new trade deal during the 90-day truce.

China’s chief economic planner, the National Development and Reform Commission (NDRC), has relaxed rules for top rate businesses that are looking to raise funds in the domestic bond markets. This measure is meant to reduce concerns about refinancing for property developers and automobiles.

These are the latest measures that seek to enhance the nation’s bond markets so that businesses do not need to depend solely on bank lending. This comes as the NDRC outlined requirements for top-credit rated organizations that can raise funds in the bond market. Moving forward, these firms should maintain a debt ratio of less than 85% and not have defaulted on loans in the last three years.

At the local level, some governments are reversing rules designed to limit real estate flipping. The municipal housing and urban-rural development bureau of Heze announced that it was eliminating provisions that mandated purchases of new or used homes to hold them for as long as three years before they were eligible for sale. The news sent shares in property developers higher because other jurisdictions might adopt the same policy.

The previous policy had led to a surge in transaction prices of existing homes. After careful investigation, we’ve decided to scrap the rule to prevent price fluctuations and the stable development of the market.

In recent years, authorities have instituted rules aimed at reining in soaring house prices.

On the data front, private measurements show that China’s growth might be bottoming out as big data indicators of industrial production and real estate are improving. In the first three weeks of December, gauges show industrial output rose from the same time a year ago, while real estate sales and prices picked up.

The USD/CNY currency pair dipped 0.06% to 6.8912, from an opening of 6.8951, at 17:45 GMT on Wednesday. The EUR/CNY advanced 0.55% to 7.8735, from an opening of 7.8304.

If you have any questions, comments, or opinions regarding the Chinese Yuan, feel free to post them using the commentary form below.

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