This and other comments made by PBOC gov Zhou Xiaochuan published by Caixin

  • dismisses speculation that China will issue capital controls
  • plays down concerns over diminishing forex reserves
  • defends the PBOC over lack of transparency

In his first interview for many months Mr Zhou dismissed speculation that Beijing would tighten capital controls and tried to ally fears that falling reserves should cause concern.

"It is normal for foreign reserves to rise and fall as long as the fundamentals face no problems,.At the moment the level of cross-border capital flows is within the normal region.We need to differentiate between capital outflow and capital flight."

He also stressed that Beijing's strategy did not include further devaluations to boost exports.

"The total trade surplus in 2015 was close to $600bn and net export's contribution to GDP was not low so there's no motive to depreciate the renminbi for the sake of net export expansion,"

He condemned "speculators" for targeting the renminbi, adding that "China will not let market sentiment be dominated by these speculative forces".

Mr Zhou reiterated that the trend is to:

"rely further on the market to decide the level of the currency and to achieve a more flexible foreign exchange rate". "The bank will use a basket of currencies as a reference and appropriately manage any daily volatility in the renminbi against the dollar as well as using a wider range of economic data, There is no basis for devaluation".

Zhou also defended the bank against accusations that Beijing lacked transparency in its management of the economy.

"The central bank is neither a god nor a magician, there is no way that we can wipe out all uncertainties". "Sometimes, the central bank has to say, 'Sorry, we have to wait for new data'.

Full (gated) FT article here. South China Morning Post has this (ungated)

China and various other markets have been closed for Lunar Year holiday but they're heading back tonight/tomorrow and traders will be keen to see the impact their return makes in these fragile times.

Data due first off the rank is:

  • January new yuan loans, expected is 1830.0bn CNY, prior was 597.8bn
  • Aggregate financing RMB for January, expected is 2200.0bn, prior was 1820.0bn
  • Money supply M0 (Jan) y/y: expected is 5.2%, prior was 4.9%
  • Money supply M1 (Jan) y/y: expected is 14.2%, prior was 15.2%
  • Money supply M2 (Jan) y/y: expected is 13.5%, prior was 13.3%

It's going to be another interesting week ahead so tighten your seat belts. Our man Eamonn will be along later to guide you through the early trading.

Zhou- PBOC is neither God or magician