Chinese Yuan Mixed As Market Weighs PBOC’s Overhaul to Interest Rates

The  Chinese yuan is mixed at  the  end of  the  trading week as  the  market weighs the  People’s Bank of  China (PBOC)’s long-postponed measure to  overhaul interest rates. Investors might also be anxious over new data that found soaring debt levels and  rising unemployment in  the  world’s second-largest economy could threaten stimulus initiatives. Other reports suggest the  US wants Beijing to  “double or  triple” its offer to  purchase American goods has not helped the  currency.

It is being reported that PBOC policymakers are thinking about finally abolishing the  current interest rate benchmark this year. The  objective would be to  decrease the  number of  tools at  the  PBOC’s disposal that controls the  price of  money over a  short period of  time. Central bank heads – Governor Yi Gang, monetary department director Sun Guofeng, and  PBOC adviser Sheng Songcheng – are all coming out in  favor of  the  move.
The sudden support for this policy comes as the current system does not help areas of the economy that need assistance. For example, the rate that financial institutions pay to borrow from each other has fallen over the last 18 months, small businesses are still seeing higher credit costs.
Moving forward, Beijing wants to  correct this gap.
As  the  economy cools down, the  federal government is witnessing two growing issues that threaten its stimulus efforts to  rejuvenate the  economy: unemployment and  debt. The  unemployment rate continues to  gradually inch higher; the  jobless rate climbed from 4.9% in  December to  5.3% in  January and  February, the  highest level in  two years.
While governments and  corporations embark upon a  deleveraging campaign and  try to  slash their debt volumes, households are borrowing at  the  fastest pace since the  global financial crisis. Today, household debt, which includes credit cards and  mortgages, represents more than half of  the  gross domestic product (GDP).
Credit card is a  major problem for  the  economy as  it surged to  7.5% of  the  GDP last year. At  the  same time, the  credit card delinquency ratio has spiked.
Despite reports that the  world’s two largest economies were inching closer to  striking a  trade agreement, a  new report finds that both sides have hit a  bump in  the  road. Although Beijing has made a  number of  concessions and  pledged to  increase its US imports, President Donald Trump has reportedly demanded that China “double or  triple” its $1.2 trillion pledge to  acquire more from the  US.
The  USD/CNY currency pair rose 0.27% to  6.7166, from an  opening of  6.6984, at  14:52 GMT on  Friday. The  EUR/CNY tumbled 0.58% to  7.5767, from an  opening of  7.6204.

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