关于《沈阳市国有企业违规经营投资责任追究暂行规定》的政策解读

China's central bank governor vowed on Monday to resolutely guard against the risk of the exchange rate overshooting, which analysts said highlighted policymakers' growing priority of maintaining the general stability of the Chinese currency amid a strong US dollar.

"We will rectify pro-cyclical market behavior, firmly address actions that disrupt market order and steadfastly prevent the risk of the exchange rate overshooting, ensuring that the yuan exchange rate remains generally stable at a reasonable, balanced level," said Pan Gongsheng, governor of the People's Bank of China.

Addressing the Asian Financial Forum in Hong Kong, Pan said that non-US currencies have generally depreciated amid an elevated US dollar index. The yuan also felt the pressure, but has demonstrated strong resilience.

Regulators have "the confidence, the condition and the capability" to maintain the stable operation of the foreign exchange market, Pan said, adding that China's economy is expected to have achieved the annual growth target of around 5 percent for 2024.

Reinforcing Pan's policy commitment, the central bank and the State Administration of Foreign Exchange raised the macro-prudential adjustment parameter for cross-border financing of corporates and financial institutions to 1.75 from 1.5 on Monday.

By raising the parameter, which determines an institution's upper limit of outstanding cross-border financing, authorities have allowed more overseas borrowing, thus boosting onshore dollar liquidity and underpinning the onshore yuan against the dollar.

This followed the central bank's decision to issue central bank bills worth 60 billion yuan ($8.18 billion) in Hong Kong on Wednesday, to help stabilize the offshore yuan.

"In a short period, regulators have repeatedly sent the policy signal of yuan stabilization, aimed at preventing any excessive accumulation of short-term depreciation expectations," said Wang Qing, chief macroeconomic analyst at Golden Credit Rating International.

Wang said that if the yuan exchange rate sharply deviates from economic fundamentals, regulators are poised to further tap into the policy reserves, such as macro-prudential management of overseas lending to contain capital outflows and a reduction of foreign exchange required reserves to boost dollar liquidity onshore.

Foreign exchange market supervision is also expected to be strengthened, analysts said. The China FX Committee, the guiding body of the self-discipline mechanism of China's foreign exchange market, pledged on Monday to promptly take measures against behavior that disrupts market order while requiring members of the mechanism to avoid exacerbating pro-cyclical behavior.

The Chinese currency modestly rallied against the dollar as of Monday afternoon, trading at 7.3320 per dollar, strengthening by 6 basis points from Friday's close, according to market tracker Wind Info.

On Friday, the yuan touched 7.3328 against the greenback, the weakest since September 2023, amid a widened US-China interest rate differential as the United States slows down interest rate cuts while China is expected to see bigger cuts.

Zhong Zhengsheng, chief economist at Ping An Securities, said that steady economic growth serves as the fundamental force underpinning the Chinese currency.

"The market looks forward to countercyclical adjustments being front-loaded and increasing in intensity this year, further improving confidence and enhancing economic momentum. Coordination between more robust fiscal support and monetary easing will be essential to more effectively promote yuan stability," he said.

Pan, the central bank governor, vowed on Monday to correct the trajectory of economic growth, utilizing various tools to maintain an accommodative financing environment.

"We will continue to uphold the market's decisive role in exchange rate formation, effectively leveraging the function of exchange rates as an automatic stabilizer for the macroeconomy and the balance of payments," Pan said, adding that the share of national foreign exchange reserves allocated in Hong Kong will increase.