Spot yuan closed steady against the dollar on Thursday as the Chinese central bank kept its mid-point nearly flat while Chinese officials gave divergent views about the outlook for the worlds third-largest economy. Offshore, yuan appreciation against the dollar implied in one-year non-deliverable forwards (NDFs) hit a six-month high, after the NDFs resumed implying yuan gains earlier this month for the first time since late September.
Chinese central bank governor Zhou Xiaochuan said in remarks published on Thursday that Chinas prompt economic moves to support the economy were starting to bear fruit, with the momentum of an economic slowdown having been arrested and leading indicators pointing to the first signs of recovery.
China expected to be a stabilising force for the world economy, Zhou said in a paper on the website of the Peoples Bank of China, www.pbc.gov.cn, published a week before leaders of the Group of 20 developed and emerging economies meet in London to take stock of the world financial crisis.
Yao Jingyuan, chief economist at the National Bureau of Statistics, was quoted by the official Shanghai Securities News as saying Chinas economy would improve in the second half of this year when a 4 trillion yuan ($586 billion) government stimulus plan, announced last November, begins to yield results. However, Li Wei, deputy director of the State-owned Assets Supervision and Administration Commission, was quoted by the newspaper as saying that China should be fully prepared to grapple with the economic crisis for an extended period of time.
Chinas cabinet, in an announcement carried by state media late on Wednesday, said the government would raise tax rebates on exports of some textiles, iron and steel, non-ferrous metals, petrochemicals, electronic/information and light industrial goods from April, in its latest export-friendly policy. "The use of other means to help Chinas sagging exports will relieve pressure on the government to use the exchange rate to help boost foreign trade," said a Chinese bank dealer in Shanghai.
The Chinese central bank - keen not to allow the yuan to depreciate lest it spark massive capital outflows, and equally keen to avoid substantial appreciation lest it trigger protests by exporters - has kept the yuan in a narrow 6.81 to 6.88 range since July last year. On Thursday, the central bank set the yuans daily mid-point at 6.8321 against the dollar, little changed from Wednesdays reference rate of 6.8328.
Spot yuan moved in a tight range of 6.8306 to 6.8325 against the dollar throughout the day before closing at 6.8320, stable from Wednesdays close of 6.8309. But the recent dollar weakness on global markets has helped to improve sentiment towards the yuan in the offshore market.