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EnglishپارسیEnglishپارسیChina’s central bank moved Friday to slow the yuan’s rapid appreciation, announcing it will cut the foreign-exchange risk reserve requirement on certain forward FX purchases to zero—a tweak designed to encourage dollar buying and temper one-way yuan strength.
The move followed Thursday’s rally, when the onshore yuan strengthened to a near three-year high versus the U.S. dollar, driven in part by exporters rushing to sell dollars after last year’s record trade surplus. On the announcement, China’s offshore yuan weakened by roughly 0.2%.
“It means the PBOC is intervening as the yuan’s appreciation is too fast,” said Yuan Tao of Orient Futures, calling the decision “unexpected.”
Policy detail
Why it matters: By reducing the “cost” of using forwards to buy dollars, the PBOC is effectively signaling it wants the currency’s rise to be more gradual—a move with potential spillovers into broader Asia FX and risk sentiment.
Source: People’s Bank of China; Orient Futures
Hong Kong’s January inflation came in softer, with both the monthly and annual prints easing versus the prior reading—and the YoY rate undershooting expectations.
Why it matters: cooling inflation keeps the near-term price backdrop benign, which can help real consumption dynamics even as growth remains sensitive to external demand.
Source: Hong Kong Census and Statistics Department
Hong Kong’s Q4 GDP met expectations, showing steady momentum rather than a late-year slowdown.
Source: Hong Kong Census and Statistics Department
China held its key lending benchmarks steady in February, reinforcing a message of policy continuity.
What it suggests: the PBoC is maintaining support via existing settings rather than cutting anew—markets will watch credit demand and property indicators for the next move.
Source: People’s Bank of China (LPR fixing)
China said it is making a “full assessment” of the U.S. Supreme Court’s tariff ruling and urged Washington to remove “unilateral tariff measures” on its trading partners, warning that “fighting is harmful” to both countries.
China’s Commerce Ministry comments came days after the U.S. Supreme Court struck down many of the tariffs President Donald Trump had imposed under emergency powers, including measures tied to the broader trade conflict with China.
Within hours of the ruling, Trump said the U.S. would impose a new 10% duty on imports from all countries starting Tuesday, before lifting it to 15%—the maximum level under that approach—an escalation that appeared to surprise some U.S. officials.
Beijing said U.S. unilateral tariffs “violate international trade rules and U.S. domestic law” and are “not in the interests of any party,” adding that cooperation benefits both sides while confrontation does not.
With trade and tariffs expected to dominate bilateral talks, attention is now turning to Trump’s highly anticipated visit to China in late March and early April, when he is expected to meet President Xi Jinping.
Source: China’s Ministry of Commerce statements; U.S. Supreme Court tariff ruling; U.S. administration comments
Hong Kong’s unemployment rate ticked higher to 3.9% (from 3.8%), reflecting a mild softening in labor-market conditions, according to government data.
Source: Hong Kong Census and Statistics Department.
China is calling for a significant expansion of cooperation with the European Union, aiming to solidify and upgrade the broader strategic partnership between the two sides. The message points to Beijing’s interest in stabilizing economic and diplomatic channels with Europe—likely spanning trade, investment, industrial policy coordination, climate/energy, and supply-chain resilience—at a time when global fragmentation and strategic competition are intensifying. Markets will watch whether the rhetoric translates into concrete steps, including progress on market access, regulatory friction, and key sectors such as EVs, tech, and critical materials.
China is set to eliminate tariffs on nearly all products from 53 African nations beginning May 1, 2026, in a move that could significantly boost African export competitiveness in the Chinese market. The decision signals a stronger push by Beijing to deepen trade and supply-chain ties with Africa—potentially reshaping import flows across key categories such as agriculture, minerals, and light manufacturing. For African exporters, the tariff removal may improve margins and market access; for China, it reinforces a broader strategy of securing inputs and expanding commercial influence across the continent.
China’s January financing data sent a two-speed signal: broad funding (TSF) was stronger than expected, but bank lending undershot forecasts—while M2 money growth accelerated.
Market read: TSF strength suggests policy support and non-loan channels are doing more heavy lifting, but the miss in new loans plus slowing loan growth hints that credit demand is still soft.
CNY angle: supportive liquidity can help stabilize conditions, yet weaker loan growth keeps the macro backdrop cautious, leaving the yuan sensitive to PBOC management and risk sentiment.
China’s Thomson Reuters/Ipsos Primary Consumer Sentiment Index (PCSI) edged higher in February to 72.82, up from 72.75 previously—signaling a small improvement in household mood and near-term demand confidence.
For markets, the uptick is a marginally supportive signal for the China growth narrative, though traders typically look for confirmation in hard activity data (retail sales, credit, housing) before repricing the macro path.
China’s housing downturn showed further deterioration in January, with house prices falling faster on an annual basis, underscoring persistent weakness in the property sector.
Market takeaway:
A deeper decline signals ongoing stress in household confidence and developer balance sheets, keeping pressure on consumption and local-government finances—key channels for China’s broader growth outlook.
CNY angle:
A weaker property backdrop tends to be CNY-negative at the margin because it strengthens the case for continued policy support and easier financial conditions. The near-term direction still hinges on PBOC management, USD trends, and risk sentiment, but property remains a structural drag.
China’s January inflation data reinforced a low-inflation / disinflation backdrop, with consumer prices undershooting expectations and producer prices still in deflation—though slightly less negative than before.
CNY angle:
Weak CPI alongside ongoing PPI deflation keeps the case alive for continued policy support, which can weigh on CNY via easier domestic rates and growth uncertainty. However, with the PBOC often managing the currency via fixings and liquidity tools, near-term CNY direction will still depend heavily on policy guidance, USD trends, and capital-flow dynamics.