Beijing seeks to soothe investor angst with cash and an open door while stepping up tirades on George Soros
State media steps up attacks on Soros to safeguard “stable” market
Beijing is trying every measure to calm the nerves of domestic and international investors as its seeming inability to tame falling financial markets has caused concern and sparked pressure as money is pulled out of China.
The central bank plunked down its biggest cash injection in three years in a bid to fill a credit crunch left by recent capital outflows and to meet heavy funding demand before the Lunar New Year on February 8.
The People’s Bank of China (PBOC) pumped a net 590 billion yuan through short-term loans, known as reverse repurchase agreements, to commercial banks by Thursday this week, the biggest since February 2013 and just after last week’s 1.5 trillion yuan injection through gross short- and medium-term lending to banks.
The eye-popping injection has failed to bring down interbank lending rates or lift the sour mood in the stock market, with the benchmark Shanghai Composite Index plunging 8.95 per cent in the four trading days of the week.
To ease foreign companies concerns China will shut the door on capital looking for an exit, the State Administration of Foreign Exchange (SAFE) clarified its stance on its official Sina Weibo account on Thursday.
“SAFE has not made any change to policies, regarding to some reports claiming the authority will curb foreign companies repatriating their earnings made in China,” the gate keeper of China’s foreign exchange said.
On another front, China’s state media stepped up attacks on George Soros and said the government remains firm in safeguarding “stability” in the country’s financial markets.
Soros drew the ire of Beijing for saying a hard landing for the Chinese economy was “unavoidable” and that he was shorting Asian currencies.
The People’s Daily published a commentary on Thursday saying “Soros and his followers are having groundless worries over the Chinese economy”.
That came a day after the official Xinhua news agency and Premier Li Keqiang (李克強) slammed voices talking about “shorting China”.
Iris Pang, a senior economist for greater China at Natixis SA in Hong Kong, said the capital outflow pressure and speed is “obviously out of the expectation of the Chinese leadership”.
They they have been trying to figure out a balance between pushing forward the internationalisation of its currency while at the same time avoiding violent capital outflows, she said.
“As you can see, the PBOC was so scared at the speed of the foreign exchange reserve drains that they raised the reserve requirement for offshore yuan last week ... but I don’t think they will introduce more hawkish tightening measures because that will drive investors out of China more quickly,” she said.