The yuan versus the US dollar has substantially depreciated since August, and China still maintains a large trade surplus and its economic fundamentals are still sound, he said. The nation has stepped up monitoring of the currency market and there are no massive capital outflows from China, he said.
The capability of local investment financing has dropped since a year ago for various reasons.
“Whether this will work eventually depends on individual companies”, said Tommy Xie, an economist at Oversea-Chinese Banking Corp in Singapore.
The National Development and Reform Commission, the country’s top planning agency, will remove quota approval processes for foreign currency or yuan notes and loans with a term of more than one year, according to a statement posted on its website yesterday.
Xu said that China’s central authorities had cleared more than 200 billion yuan ($31.4 billion) from local governments that failed to spend their budget allocations, reported Sina on Wednesday.
China’s surprise yuan devaluation last month meanwhile sparked fresh concerns about a global “currency war” – whereby countries devalue their currency in a tit-for-tat scrabble to gain a competitive edge – and unfair protection of exporters by Beijing. Total issuance of onshore yuan corporate bonds has jumped 21 percent this year to 5.02 trillion yuan (S$1.1 trillion).
Some firms had bought large amounts of foreign currency to engage in speculative arbitrage, he said.
The tweaks come amid mounting speculation China will do more to counter outflows. The brokerage now predicts the yuan will drop to 7.50 yuan per dollar by the end of next year.
China is mulling a 15-20 percent devaluation of its currency by the end of 2016 in a move that could spark a crisis in Asian markets, according to research firm IDEAglobal. The exchange rates closed at 6.3709 the following day.
The SAFE denied to take extra measures to ban the buying and selling of foreign exchanges in order to control capital flows. “But the pressure will likely continue until the economy sees sustained recovery.” yuan gained 0.08 percent to close at 6.3660 a dollar in Shanghai, according to China Foreign Exchange Trade System prices.