PBoC Goading Shorts Into Squeeze or Trouble Ahead

Reuters: China confident of keeping yuan stable: central bank governor
China is confident of keeping the yuan basically stable at reasonable and balanced levels, Yi Gang, the governor of the People’s Bank of China (PBOC) told a meeting recently, state media reported on Tuesday.
iFeng: 易纲:对保持人民币汇率在合理均衡水平上基本稳定充满信心
Sogou: Yi Gang: Full of Confidence in Maintaining the Basic Stability of RMB Exchange Rate at a Reasonable and Balanced Level
President Yi Gang also made a speech on interest rate liberalization, RMB exchange rate and bond market mechanism construction. He said that the current benchmark interest rate for deposits and loans is at a moderate level, striking a balance between safeguarding the interests of ordinary people and maintaining the competitiveness of banks, which is suitable for China's national conditions... In the process of further pushing forward the interest rate marketization reform, the central bank's deposit benchmark interest rate will continue to play an important role. In fact, the loan interest rate has been liberalized, but we can still further explore the reform ideas, such as the study of no longer publishing the loan benchmark interest rate, etc. At the same time, we should continue to deeply study the trend of loan interest rate and the problem of switching existing loan contracts, and persist in pushing forward the reform on the premise of being beneficial to the common people and solving the problem of financing difficulties and high financing costs for small and medium-sized enterprises.

President Yi Gang said that he is full of confidence in keeping the RMB exchange rate basically stable at a reasonable and balanced level. The interest rate spread between China and the United States 10-year treasury bonds is still in a relatively comfortable range. The possibility of the Federal Reserve raising interest rates is reduced, which is conducive to the stability of the RMB exchange rate.

He also pointed out that the issuance of bonds should be effectively promoted to implement investor protection provisions, improve the quality of information disclosure during the duration of bonds, improve the efficiency, transparency and predictability of bond default disposal, and further enhance the attractiveness of China's bond market.

Starting from the level of market construction, the bond market should be opened to the outside world and the gap with mature markets should be continuously narrowed. First, market construction should be carried out in a legal thinking and legal mode to create a good legal environment. The second is to encourage ideological collision and full discussion in market practice, put forward new concepts, formulate and perfect new rules and agreements, and strive to be accepted by the international market, which is the embodiment of the strength of the financial market. In the context of the opening up of the bond market, financial infrastructure should give full play to its professional wisdom, put forward professional plans, and be compatible with the first-level custody and multi-level custody modes to better serve international investors. The third is to build a good market culture, in line with international standards, and strive to be widely accepted and loved; The fourth is to further improve the efficiency of resource allocation and better play the role of the market in resource allocation.

President Yi Gang attached great importance to the work of China's debt price index and fully affirmed the organizational form of the expert steering committee on China's debt index. He pointed out that the China Debt Index Expert Steering Committee is a professional platform for inter-bank exchanges and should jointly study and promote market development through ideological collision and free discussion.

In his speech, Chairman Li Yang pointed out that economic growth requires more financial resources than in the past. Global debt growth has become a trend and rising debt intensity will become the new normal. China's debt price index should pay close attention to the debt problem, study debt pricing, and make more in-depth technical preparations. Dean Zhang Xiaohui also pointed out that the benchmark bond price index represented by the yield curve is a "public good" in the financial market with strong externalities. It needs a professional platform such as the China Debt Index Expert Steering Committee to provide continuous supervision and guidance, and to continuously improve the compilation and application of the index during the free collision of ideas.

Translation is often imprecise, but I don't think the English headlines fully capture the Chinese in the latest PBoC jawbone.

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