In the first 21 days of March, China also recorded net outflows of 59 billion yuan through the Stock Connect program with Hong Kong, although the total amount was less than the 70 billion yuan in capital outflows recorded in March 2020, according to Macquarie report. famous. Analysts expect capital outflows in yuan assets to remain volatile in the coming weeks, raising concerns about how the People’s Bank of China will manage the yuan amid forecasts of another US Federal Reserve rate hike. tackling inflation could worsen outflows from emerging markets and weaken currencies.

  If authorities fail to get creative about creating liquidity, China is heading for the equivalent of the Freya Beamish recession

The war has renewed fears in Taiwan about the growing risk of military attack by mainland China, which sees the island as a breakaway province that needs to be reunited by force if necessary. The climate, beyond the expectations of the US Federal Reserve’s interest rate decision, has weighed on the island’s stock market. Foreign investors sold shares worth NT $ 450.2 billion (US $ 15.7 billion) in the four weeks since the war began on February 20, almost equal to total foreign equity sales in 2021, according to its estimate. SCMP based on data from the Taiwan Stock Exchange. The global market has been volatile since the start of the war, in part also due to a 25 basis point increase in the US Federal Reserve’s short-term benchmark interest rate earlier this month. US Federal Reserve policy makers also said they were ready to take more aggressive action to reduce unacceptably high inflation, including possibly raising interest rates by half a percentage point at the next policy meeting in May. Freya Beamish, head of global macroeconomics at London-based research firm TS Lombard, said China’s “stubborn” management of the yuan would test the political limits of low growth. “Prolonged weak growth would in any case lead to a devaluation of the yuan… eventually,” he said on Thursday. “If the authorities are not able to be creative in creating liquidity, China is heading for the equivalent of a recession.” The country’s foreign exchange reserves, the largest in the world, fell to $ 3.214 trillion at the end of February from $ 3.222 trillion, despite the strong yuan-dollar exchange rate. 02:52 Ordinary Russians feel the financial pain of Western sanctions on Moscow over its invasion of Ukraine Credit demand was much weaker than expected in February, as new bank lending in China fell to 1.23 trillion yuan ($ 193.2 billion), down from 3.98 trillion yuan in January, up from pressure on the central bank to further relax policy to support the slowdown in the economy. Beijing has set a growth target of “about 5.5 percent” for 2022. China’s economy in the first quarter is expected to reflect losses from the worst cases of coronavirus in more than two years, as new infections have risen in recent weeks. “As it is already the end of the first quarter, the risk of the quarter [gross domestic product] Growth below 4 percent is on the rise. “If this is the case, the full-year growth target of 5.5% will also face huge uncertainties,” Commerzbank said on Friday. Already, US moves to tackle inflation have led to hesitations from China’s central bank about how much easing – including interest rate cuts – is needed to boost the economy, while also trying to avoid putting pressure on the yuan. . The Chinese yuan appreciated slightly to 6.3585 per US dollar on Friday, recovering from the 10-day low of the previous day. The currency is one of the few in the area that is well on its way to closing the week stronger than it started. Swiss bank UBS said in a note last week that it expects China to allow a “limited” devaluation of the yuan. “The limited devaluation of the yuan in all cases is partly due to UBS’s global view that the US dollar will weaken from current levels, but also because we believe that the Chinese government would not want to see a significant devaluation of the currency and is likely to “Strengthen controls on capital outflows if necessary to slow depreciation,” UBS said.

  Capital outflow pressure is mounting this year as the Fed grows and Larry Hu goes to war

China’s foreign exchange regulator, the State Foreign Exchange Administration, said last week it would monitor cross-border capital flows more closely as it helped companies defend against foreign exchange risks. “In each case, the people have, for the first time, been offered a chance to vote. “As a result, we expect the yuan to weaken moderately to 6.5-6.6 against the US dollar by the end of the year,” said Larry Hu, chief economist for China at Macquarie Capital. “Thus, the increased trade surplus and the large pool of dollars built by Chinese banks and companies in the last two years could help absorb the vibrations from the outside. “As a result, pressure from capital outflows would not limit policy relaxation this year.” Additional Reuters report