CNH: USD/CNY Fix Edges Up, USD/CNH Drifts Higher But CNH/JPY Higher

China must actively pursue new growth opportunities in areas such as expanding consumption and investment, advancing technology and industrial development, and the promotion of urban-rural integration, according to Han Wenxiu, vice director at the Central Financial and Economic Commission. At a recent conference organised by the China Center for International Economic Exchanges, Han acknowledged that China’s current economic development faces complex, intertwined cyclical, structural and institutional challenges. He emphasised the importance of maintaining necessary fiscal deficits, managing total debt levels and ensuring adequate overall expenditure.

The USD/CNY fix printed at 7.0656, versus a BBG market consensus of 7.0555, which leaves the fixing error at +101pips, slightly down from Friday's +128pips outcome. Friday's fixing was 7.0638. The fixing error has remained positive since Nov 27, suggesting a lean against yuan appreciation pressures. USD/CNH is little changed so far today and hasn't reacted much to the fixing. We were last at 7.0545/50. Coming up shortly we have China home price data for Nov, followed by Nov activity figures a little later on.   

The introduction of the term "cross-cycle" in the latest Central Economic Work Conference signals a strategic shift in macroeconomic policy, according to Guan Tao, former senior official at the State Administration of Foreign Exchange. Guan explained that while macro policies will remain active, they will not involve excessive stimulus or a "flooding" of the economy. Instead, policies will be more tailored and flexible, leaving room for adjustments as needed. On fiscal policy, Guan noted that the deficit ratio is likely to remain around 4% next year, although the scale of new government debt—encompassing deficits, special bonds and special government bonds—could exceed the CNY11.8 trillion level set for this year. As for monetary policy, Guan highlighted that while the supportive stance will continue, large-scale easing was unlikely.