Chinese Yuan: Credit softness may spur PBoC easing – Commerzbank
Commerzbank’s Charlie Lay and Dr. Henry Hao point out USD/CNY is stable around 6.75, with their model implying a slightly stronger PBoC fix.
Commerzbank analysts Charlie Lay and Dr. Henry Hao foresee a potential easing of the People's Bank of China (PBoC) monetary policy if China's July credit and money supply data indicates a softening of domestic borrowing appetite. With the Chinese yuan's USD/CNY exchange rate currently stable near 6.75, markets are closely monitoring the upcoming data to gauge the health of the country's private sector borrowing.
If July's credit and money supply figures show a weaker-than-anticipated performance, it could further indicate waning private sector borrowing, thereby heightening the likelihood of the PBoC implementing more targeted monetary easing measures. China's July credit and money supply data is anticipated to reveal a marginal moderation in growth, with M2 growth projected to ease slightly to 7.9% year-on-year from 8.0% in June and M1 expected to decline to 3.9% from 4.0%.
Overall, aggregate financing for the year-to-date is expected to rise to CNY21.9tn from CNY20.8tn in June, although new yuan loans outstanding may decrease marginally to CNY10.6tn from CNY10.7tn previously. The Chinese government has nearly completed 90% of its 2026 local government debt swap quota, refinancing CNY1.8tn into official bonds.
Additionally, new special bond issuance by local governments has reached CNY2.5tn, accounting for approximately 58% of the full-year allowance of CNY4.4tn, leaving ample room for further issuance in the second half of the year.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — it may contain errors, so check the original before relying on it.
