Stability in Chinese currency may be at an end, analysts say
Concerns that Chinese corporations are taking on too much debt have increased.
Market commentators said the Chinese currency’s recent stability may have ended and the yuan may weaken.
China’s currency — traded onshore — was stable in March and April at about 6.5 to the US dollar.
That stability was likely due to intervention from Chinese officials, Singapore-based Heng Koon How, a senior investment strategist at the private bank Asia Pacific, Credit Suisse, said.
All hidden risks have the potential to derail the recent stability in the yuan and drive it lower, he said.
Concerns that Chinese corporations are taking on too much debt have increased. The economic stability seen in the first quarter may be short-lived. There are rising domestic bubbles in the property sector and commodity futures markets. All these risks suggest possible further weakness for the yuan, Heng said in his report.
Worries over the quick build-up of debt by Chinese corporations have been a constant concern. China’s total debt jumped to about 240 per cent of GDP in the first quarter of 2016, from around 150 per cent at the end or 2007.