A strong yuan and calm markets are providing a window for People’s Bank of China Governor Zhou Xiaochuan, who is due to step down from his position soon, to push through market reforms that he has long aimed to implement, according to Bloomberg.
Signs of liberalization came Tuesday, when the central bank tweaked its management of the daily currency fixing to increase the influence of market forces. PBOC advisor Huang Yiping told Bloomberg that this move showed authorities’ desire to further liberalize the yuan’s exchange rate.
The PBOC is also making its daily interactions with the money market more transparent, helping China move closer to Zhou’s long-held goal of a price-based monetary framework. The bank is also taking action to rein in risks in the financial and property markets after vocal warnings from Zhou.
“The Chinese economy has entered 2018 in a Goldilocks state – ‘not too hot and not too cold’. This has created a good opportunity for the PBOC to press ahead with important reforms,” Rajiv Biswas, APAC Chief Economist at IHS Markit Ltd in Singapore, told Bloomberg. “However the PBOC will have to walk a difficult tightrope during 2018, to provide sufficient liquidity and credit growth to allow the Chinese economy to grow at a pace of around 6.5 percent.”