China Said More Corporate Deleveraging to Come, Expecting Investors to Favor RMB

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China is set to introduce more measures to promote corporate deleveraging, with a focus on state-owned enterprises, an anonymous source familiar with financial regulatory matters in the country was quoted as saying in China Daily on Wednesday.

According to the source cited in the report, heavily indebted state-owned enterprises will be regulators’ key target while the next round of deleveraging move will focus on curbing unregulated borrowing by those state-owned enterprises already in trouble.

The country’s regulators will “undertake more supportive measures to overcome obstacles that have hampered debt-reduction problems, and heavily indebted state-owned enterprises will be the key target,” the paper said.

Lower corporate leverage ratios have been a priority in China. While the country indicated last month that it will use monetary policies such as targeted cuts in the reserve requirement ratio (RRR) for banks to support debt-to-equity swaps this year, banking and insurance regulator also said that it will go ahead with deleveraging and reduce external risks.

Former central bank governor: Trade war might drive investors to RMB

On the foreign exchange front, China has also seen greater volatility for its currency amid an escalating trade war with the US.

China's currency has lost more than 9 percent of its value against the greenback since April.

Zhou Xiaochuan, the former central bank governor was quoted on Tuesday in a CNBC report as saying in Valdivostock, Russia during the Eastern Economic Forum that the trade war could persuade an increasing number of global investors to favor RMB over the greenback.

"If the U.S. uses too much financial sanctions against the other country, it drives (investors) to consider the other currency," the former People's Bank of China (PBOC) Governor was cited as saying in the report.

Last week, Trump threatened that he was ready to go on duties targeting another US$267 billion of China goods.

 

 

 

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