China’s forex reserves drop below US$3 trillion for first time in 6 years / SCMP
One of the biggest stories about business in China last year was capital outflow and later restrictions on outward investment and exchange. So far in 2017, the new capital controls appeared to have been working, though official numbers showed that by the end of January, the “psychological” threshold of $3 trillion in foreign exchange reserves was crossed. The South China Morning Post notes that analysts believe the landmark could change investor sentiment toward Chinese currency, and that if the yuan continues to depreciate, officials are likely to implement even stronger capital outflow regulation. Bloomberg reports that the continuing regulatory uncertainty is making foreign investors wary, as many don’t want to risk investing money in China that they won’t be able to withdraw later.
Why China can’t get rid of its bank credit obsession? / SCMP
Despite President Xi’s order to deflate the property bubble and reduce long-term financial risks, a record monthly new loan size in the first month of 2017 is expected to beat the 2.51 trillion yuan record of January 2016. One key factor behind the potential bigger-than-ever loan size is China’s goal to achieve a growth rate of about 6.5 percent in 2017, which requires the country to heavily rely on issuing loans and encouraging real estate investment. In a bid to cool off the lending frenzy, the People’s Bank of China raised money market rates by 10 basis points last week.
Lucas Niewenhuis is an associate editor at SupChina who helps curate daily news and produce the company’s newsletter, app, and website content. Previously, Lucas researched China-Africa relations at the Social Science Research Council and interned at the Council on Foreign Relations in New York. He has studied Chinese language and culture in Shanghai and Beijing, and is a graduate of the University of Michigan.