Xi defended the BRI this week, as the initiative comes under increasing pressure from critics internationally. The Chinese leader emphasised in an August 27 meeting that the BRI is not created to benefit China, but all its participants, according to state media.
“The broad support for the BRI shows aspiration from the countries involved, developing countries in particular, for peace and development,” Xi said. “[The BRI] does not differentiate countries by ideology nor play the zero-sum game. As long as countries are willing to join, they are welcome.”
The state media report said Xi advocated for a policy system for providing support for the BRI. He also wanted funding to come from organisations other governments to invest in infrastructure in Belt and Road countries.
China has traded more than $5tr in good with Belt and Road countries in the past five years, marking an average annual increase of 1.1%, the State Council Information Office (SCIO) said at a press conference on Monday. China is now the largest trading partner of 25 of these countries. Economic and trade zones in these countries took in $28.9bn of investments in this period, generating 244,000 jobs in these localities and tax revenues of over $2bn.
Steven Mnuchin, the US treasury secretary, has welcomed the strengthening of the RMB in recent days, noting that China’s support for RMB strength is key to a trade agreement with the US.
“As part of any deal, we would want to make sure that they support their currency,” Mnuchin told US media on August 28. “We’re not going to have a situation where we pick up gains in trade only to lose them in currency devaluation.”
Asked if the US will declare China a currency manipulator over the intervention, Mnuchin said Beijing’s backing for a stronger RMB should not be categorised as manipulation.
“If they go in and support their currency, that is not currency manipulation,” he said. “If they let their currency weaken, either for structural reasons or actual manipulation, that’s something that’s manipulation.”
Three days after Mnuchin’s interview, Trump said China is manipulating its currency to offset the impact of US tariffs.
“They’re trying to make up for lack of business by cutting their currency,” he told media on August 30. “It’s no good. They can’t do that. That’s not, like, playing on a level playing field.”
Trump made the same argument in another media interview just 10 days ago, when he accused both Beijing and the European Union of fighting the trade war by weakening their currencies.
The onshore renminbi (CNY) and offshore renminbi (CNH) have lost 4.94% and 5.09% against the dollar so far this year, according to Wind data. But the pair steadied in recent days. They were trading at 6.8348 and 6.8485, respectively, at 11.22am, stronger by 0.02% and 0.27% from the previous close. The People’s Bank of China has insisted that it has not intervened in the RMB exchange rate.
Foreign institutional investors buying bonds in China will be exempted from corporate income tax and value-added tax on their interest gains for three years, the State Council announced on August 30
“[This is] an effort for greater opening up and [is going] to further attract overseas capital,” said the State Council.
The announcement clarified the tax collection policy for Bond Connect transactions — a key demand from foreign investors, along with the introduction of block trade and delivery versus payment (DVP). The latter was launched last Friday. Index provider Bloomberg Barclays, which plans to put Chinese bonds in its Global Aggregate Index in April 2019, said all three demands had to be met to guarantee the inclusion.
The China Banking and Insurance Regulatory Commission (CBIRC) said this week that it will press ahead with efforts to control risk in the financial sector.
In an August 29 statement, the watchdog said it will control risk deriving from internet finance, prevent bubbles in the property market, and double down on its efforts to deal with non-performing loans. The CBIRC will also forestall risk accumulating from local government debt, according to the statement.
Echoing the words of president Xi Jinping from April, the CBIRC said the key measures aiming to further open up access for foreign players in the banking and insurance sectors will happen sooner rather than later. The regulator formally abolished the foreign ownership cap for banks and asset managers on August 23.
Separately, the watchdog said it promote the development of financial services and sustainable financing solutions for the BRI projects.
On August 26, Yi Gang, the governor of the PBoC met with Giovanni Tria, the Italian economy and finance minister, and Fabio Panetta, deputy governor of the Bank of Italy, according to a statement by the PBoC. The three officials exchanged views on financial stability, opening up of financial markets and RMB internationalisation. In a separate statement, Bank of Italy said it would begin adding renminbi to its foreign exchange reserves.