BEIJING/SHANGHAI, Aug 30 (Reuters) – China’s foreign money regulator has been conducting a uncommon survey of banks and corporations to ask about their danger administration processes and talent to deal with volatility within the yuan, three banking and coverage sources instructed Reuters.
The State Administration of Overseas Alternate (SAFE) surveyed “how corporations in numerous sectors managed their FX publicity and the way they used hedging instruments”, stated one of many sources, who was immediately concerned within the survey.
The SAFE didn’t give a motive for the survey, however its timing suggests Chinese language authorities are girding for foreign money volatility because the Federal Reserve and different main central banks wean economies off huge pandemic-era stimulus, and are eager to keep away from a repeat of the violent yuan slide throughout U.S. tightening in 2015-2016.
Two different sources, additionally immediately concerned, stated the survey carried out this month was completely different from the routine quarterly questionnaire that banks submit on their proprietary buying and selling books.
This survey was much like ones accomplished in 2014 and 2016, the sources stated, with the banks being surveyed requested to offer particulars about how they managed corporations’ expectations and the way they’d helped company shoppers to hedge their FX exposures.
The SAFE had not responded to Reuters’ request for feedback on the time of publication of this text.
China’s yuan is sort of 11% greater than in Could final yr, supported by heavy overseas funding inflows into mainland shares and bonds and an enormous present account surplus. Its features seem closely stretched, with its trade-weighted index (.CFSCNYI) at 5-1/2-year highs.
Economists have of late begun to anticipate some weak point within the foreign money as a regulatory crackdown hurts China’s inventory markets, exports gradual and policymakers loosen credit score circumstances to help a slowing economic system.
Marco Solar, chief monetary markets analyst at MUFG Financial institution based mostly in Shanghai, stated the survey appeared to point regulators had been making ready for a “probably heavier storm” because the Fed strikes in direction of tapering coverage.
It was additionally probably a progress test following SAFE’s prodding of banks earlier within the yr to coach their company shoppers about hedging and volatility, he added.
China’s monetary regulators have in current months been cajoling corporations to guard themselves towards foreign money dangers because the central financial institution progressively loosens its reins on the yuan.
The Folks’s Financial institution of China has repeatedly warned of the affect of coverage normalisation in main developed markets on rising market capital flows and currencies.
There has nevertheless been little readability on when and the way rapidly the Fed will taper coverage this time.
In remarks to the annual Jackson Gap financial convention final Friday, Fed Chair Jerome Powell affirmed an ongoing U.S. financial restoration, however supplied no alerts on when the U.S. central financial institution plans to chop its asset purchases past saying it might be “this yr”. read more
Reporting by Xu Jing and Ryan Woo in Beijing, Winni Zhou in Shanghai; Enhancing by Vidya Ranganathan and Jan Harvey
Our Requirements: The Thomson Reuters Trust Principles.