The week in renminbi: Fitch says shadow banking shrinking in China, US delays Chinese tariff decision, CDB approves $50bn loans to Africa
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The week in renminbi: Fitch says shadow banking shrinking in China, US delays Chinese tariff decision, CDB approves $50bn loans to Africa

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Fitch Ratings says China has made progress in downsizing the country’s shadow banking sector, the US Department of Commerce delays its decision over imposing tariffs on Chinese goods, and China Development Bank (CDB) loans to Africa total more than $50bn in the first half of this year.

Banks:

  • China has shrunk its shadow banking sector since the start of 2017, according to an October 8 Fitch Ratings report. Fitch said China experienced its first simultaneous drop in interbank assets and liabilities since 2010 this year. As of the end of August, interbank assets and liabilities were down 13.8% and 1.6% year-on-year, respectively, according to data from the China Banking Regulatory Commission quoted by Fitch.

    While clamping down on shadow banking could limit liquidity in the wider financial system, Fitch noted that the People’s Bank of China decision in late September – to cut the required reserve ratio (RRR) for banks lending to rural or micro enterprises – means the real economy is unlikely to be affected by this change.

    “The recently announced targeted cut to the RRR illustrates that the authorities will use policy tools to guard against a significant impact on prioritised sectors,” said the report. “[The RRR cut] would alleviate pressure on borrowing costs for targeted sectors, while maintaining a grip on banking sector risks.”

Trade:

  • The US Department of Commerce has refrained from imposing preliminary duties on Chinese aluminium foil imports, according to an October 6 media report.

    The department launched a review into whether China should be categorised as a market economy in April, which could lead to the US imposing tariffs on certain Chinese imports. It will announce the outcome of the review by November 30.

Investment:

  • CDB approved over $50bn of loans to 43 African countries in the first half of 2017, Wang Yongsheng, vice president of the bank, was quoted by media as saying. The loans have been used to develop agriculture, infrastructure and manufacturing on the continent.

FX:

  • The PBoC’s renminbi fix against the dollar was set at 6.6493 this morning, 124bp weaker from the last fix before the National Day holiday on September 29. The NEX CNH benchmark came in at 6.6549 at 4.31pm on Friday, weaker than 6.6429 on Thursday.

    The dollar index closed at 93.961 on Friday, up 0.54% from Thursday, according to Bloomberg. The Thomson Reuters CNY reference index closed at 95.70 on Sunday, down 0.14% from its previous close.

    The trade-weighted index by CFETS closed at 94.34 on September 29, down 0.04% month-on-month, with the BIS basket and special drawing rights basket at 95.25 and 94.88, up 0.14% and down 0.43% in the same period, respectively.

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