Banking & finance
Regulators tighten control on China’s US$30 trillion currency market
Banks and traders are feeling the pinch as Beijing attempts to curb financial risks it sees as potential threats to the economy.
The Bank of International Settlements (BIS)-backed pilot scheme involves the central banks of China, the United Arab Emirates, Hong Kong and Thailand.
China’s Cross-Border Interbank Payment System will increase the number of direct taking part banks using the system to nearly 80 by the end of this year, according to chief executive officer Xu Zaiyue.
Global inflation, asset bubbles and other consequences of modern monetary theory will be major issues for next year, says Zhou Xiaochuan, an ex-governor of China’s central bank.
Huaxia Bank confuses customers as it becomes latest Chinese lender to stop offering some foreign exchange services, while banking regulators keep pressure on to maintain financial stability.
Bank of Communications, China Construction Bank say they are working with fund managers and insurers to explore expanding the e-yuan’s use beyond low-value daily retail payments.
Liberalising China’s markets could help generate greater returns for citizens via overseas investments, according to a former official in charge of international payments.
China is a net importer of goods from many Southeast Asian nations and a slowdown in demand would have knock-on effects for their currencies, analysts say.
China’s State Council on Wednesday reaffirmed its commitment to open up to foreign investments amid concerns the economy will slow in the second half of the year.
Analysts caution that widespread adoption of China’s digital currency must be gradual, as embracing the e-yuan will be ‘an educational process and a cultural shift’.
With China at a different stage in its economic recovery than the US, Beijing’s main focus is on maintaining stability in its own financial markets.
Consumption outlook in the year’s second half ‘remains pessimistic’ for China, and capital outflow could have an impact on the yuan’s exchange rate.
China has already distributed some 200 million yuan (US$31 million) in digital currency as part of pilot projects across the country having began exploring the concept in 2014.
Now it’s clear that just as threads spun from the pupae of silkworms drove the growth of a global trade network, China’s digital yuan may weave an enduring international system of finance.
Financial authorities are weighing threats to monetary sovereignty as the race to launch a central bank digital currency (CBDC) heats up.
Hong Kong’s de facto central bank has set up a working group to study ‘legal and regulatory issues’ related to an e-Hong Kong dollar.
Holdings of foreign currencies in Asia’s fast-growing emerging economies hit US$5.82 trillion last month – the highest level in seven years.
Guan Tao, a former senior official at the State Administration of Foreign Exchange, says long-term appreciation of the yuan could hurt job creation among small exporters, damaging efforts to boost domestic demand.
Speculation in bitcoin and other cryptocurrencies is increasingly popular among Chinese millennials and older members of Generation Z as way to get ahead, and maybe even pay for a flat.
Analysts are looking into whether the Australian dollar has started to weaken recently because of ongoing tensions with China.