Imports fell 18.8 percent, giving a $63.3 billion trade surplus. But Zhao Zhongxiu of the University of International Business and Economics in Beijing said “weak manufacturing activities and a bearish housing market” had also hit “domestic demand for commodities”, the official China Daily reported. As China suffers from the outflow of capital and downward pressure on the yuan, attracting more funds from overseas has become a priority.
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While the yuan has steadied in recent weeks, traders noted it is largely due to a broadly weaker dollar and heavy direct and indirect intervention by the central bank, which sold a large amount of foreign exchange in recent months to shore up the currency.
“The surge of new credit in January could be a one-off event”, said Standard Chartered economist Ding Shuang, adding that new loans are likely to trail off in the following months as the central bank is still cautious over the rising leverage in the nation’s financial system, especially as economic growth slows further.
China’s economy grew 6.9 percent in 2015 – the lowest rate since 1990 – and is expected to slow further this year.
“China has the world’s largest foreign exchange reserves; we will not allow speculative forces dominate the market sentiment”, Zhou said in the interview published over the weekend.
Zhou said there was no basis for the yuan to keep falling, and China would keep it stable versus a basket of currencies while allowing greater volatility against the United States dollar.
The People’s Bank of China (PBOC) fixed its yuan at the highest rate in over a month as it continued efforts to stem speculation of an imminent devaluation. The PBOC injected 1.53 trillion yuan via its standing lending facility (SLF), medium-term lending facility (MLF) and pledged supplementary lending (PSL).
China is expected to target economic growth in a range of 6.5 per cent to 7 per cent this year, sources have said, setting a range for the first time because policymakers are uncertain on the economy’s prospects. Imports also fell 14.4% in local currency terms. China’s trade data is scheduled to be released soon and a disappointing outcome might just re-ignite flight of the currency to safer haven investments.
China’s new yuan loans surged to a record high in January ahead of Lunar Near Year holidays as banks usually tend to front load loans at the start of the year.
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The currency appreciated 1.25 percent, the most since July 2005, to 6.4954 a dollar as of 4:36 p.m.in Shanghai, according to data compiled by Bloomberg.
