China Is Said to Be Satisfied With Yuan Exchange-Rate Reform

  • Premier Li visited PBOC, China Construction Bank on Monday
  • Li encouraged central bank to improve its communication

Top Chinese officials are satisfied that their overhaul of the yuan’s exchange rate since last August has now been a success, after a fitful start, according to a person familiar with the matter.

Premier Li Keqiang told central bank officials on Monday that China’s currency settings should remain stable and transparent, according to the person, who was an official present at the meeting. Li encouraged the People’s Bank of China to improve communication with markets, including holding more press conferences and accepting interview requests, the official said, asking not to be named for lack of approval to speak publicly. Li said the exchange-rate reform in August was misinterpreted by global investors due to a lack of accurate and timely communication, the person said.

The premier, who also visited China Construction Bank Corp. on Monday, suggested that banks increase lending for major infrastructure projects such as railway construction in central and western China, according to the official and another person familiar with the meetings. The State Council Information Office didn’t immediately respond to a fax seeking comment.

For a primer on China’s exchange-rate reforms, click here.

At the PBOC meeting, an assistant governor of the central bank told Li that a mid-year liquidity squeeze is unlikely this year, and that liquidity is relatively stable. The PBOC’s press office didn’t reply to a fax seeking comment.

Li said at the PBOC meeting that the Finance Ministry and other authorities will look for ways to lower the tax burden for financial institutions, especially banks, which have seen their tax rate increase after a value-added levy reform implemented in May.

China’s official state media yesterday reported on other details of the meetings. Li said banks must improve the way they serve the real economy, especially under-invested startups in new industries, while regulators should enhance supervision to adapt to the changing market, according to the Xinhua News Agency. China will work to reduce the leverage ratio of non-financial companies, increase financial supervision and seek to prevent systemic or regional financial risks, Li said according to Xinhua.

— With assistance by Keith Zhai, and Yinan Zhao

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