Over $12.4 Billion USD Transacted On China’s Official Blockchain Project, PBoC Affiliate Report — Lujan Odera

After studying trade and finance as the main use of the blockchain, the bank launched the first sovereign blockchain in 2018, registering a couple of patents along the way. So far, the country ranks as the largest blockchain patent holder in the world.

The PBoC maintains the bank will not support any public blockchain yet as it focuses on its own blockchain project. So far, its blockchain project that offers multi-stage accounts receivable financing, a fast track for rediscounts and supervision over foreign trade payments is on the rise. Watch out for blockchain adoption across China.

CoinGape
Over $12.4 Billion USD Transacted On China’s Official Blockchain Project, PBoC Affiliate Report

Lujan Odera

Zero Hedge — China Fixes Yuan Weaker Than 7 For First Time In Over 11 Years

For the first time since March 2008, PBOC fixed the yuan weaker than 7 per USD....

Zero Hedge

China Fixes Yuan Weaker Than 7 For First Time In Over 11 Years
Tyler Durden

See also at ZH

Ray Dalio Tells Investors 'Bet On China' As The Next Global Empire

Gene Frieda — China’s Difficult Balancing Act

China needs to keep growth high enough to maintain social stability, but also must preserve external stability via the renminbi’s exchange rate. How China manages its currency during its economic policy shift could have important global consequences.

China is not sovereign in its currency since it pegs to the dollar. Currency sovereignty requires floating the rate whereas as peg sets a fixed rate. This means that China domestic policy is constrained by have to manage the exchange rate within the corridor of the peg.

China needs to float the RMB to return to currency sovereignty and manage its economy instead of managing the exchange rate. As Russia did when hit by US sanctions.

Project Syndicate
China’s Difficult Balancing Act

Gene Frieda | executive vice president and global strategist for PIMCO

Yi Gang — China's monetary policy framework - supporting the real economy and striking a balance between internal and external equilibrium

My speech is composed of four parts. The first part is an introduction to China’s monetary policy framework, the second part clarifies how monetary policy supports the real economy, the third part is about how to prevent and resolve financial risks, and the last part focuses on how to strike a balance between internal and external equilibrium. As we know, the Law of the People’s Bank of China explicitly stipulates that the ultimate goal of China’s monetary policy is to maintain currency stability and thereby facilitating economic growth. To maintain currency stability has two tiers of meanings: internally it means to maintain prices stable and externally it means to keep RMB exchange rate basically stable at an adaptive and equilibrium level....

BIS
Yi Gang: China's monetary policy framework - supporting the real economy and striking a balance between internal and external equilibrium
Lecture by Mr Yi Gang, Governor of the People's Bank of China, at Chang'an Forum, held by the Chinese Economists 50 Forum, Tsinghua University, Beijing, 13 December 2018

Xinhua — China's central bank unveils new targeted monetary tool

China's central bank on Wednesday introduced a new kind of lending facility to encourage loans to small and private businesses.

The People's Bank of China (PBOC) is now open to applications from qualified banks for the use of a new tool called targeted medium-term lending facility (TMLF) to get stable long-term funds to support their businesses.

"[TMLF access of] financial institutions will depend on growth of their loans to small and micro businesses as well as private businesses," the PBOC said on its website.

Large commercial banks, joint-stock banks and major city commercial banks that lend heavily to the real economy and meet macro prudent requirements can apply for the TMLF, which has a maximum maturity of three years and an annual interest rate of 3.15 percent, 15 basis points lower than the existing medium-term lending facility (MLF).
The central bank uses monetary tools such as the MLF to manage short- and medium-term liquidity in the banking system of the world's second-largest economy.

The PBOC also announced Wednesday an increase of relending and rediscount quotas by another 100 billion yuan (around 14.5 billion U.S. dollars), citing effectiveness of previous expansions in improving financing to small and micro businesses as well as private businesses.

It has already boosted the quotas by a total of 300 billion yuan with two hikes in June and October this year.

China will continue to maintain a prudent and neutral monetary policy, enhance counter-cyclical adjustments, and ensure reasonable and sufficient liquidity in the banking system, the PBOC said.…

Ecns
China's central bank unveils new targeted monetary tool

Xinhua

Yu Yongding — China must release the renminbi

Float it already! No float, no currency sovereignty.

East Asia Forum
China must release the renminbi
Yu Yongding is a Senior Fellow at the Chinese Academy of Social Sciences and former member of the monetary policy committee of the People’s Bank of China.

This article is abridged from Yu Yonding, ‘The reform of China’s exchange rate regime’ in Ligang Song and Ross Garnaut (eds.), Forty Years of Chinese Reform, China Update, ANU Press, 2018.

OAN — China To Appoint Yi Gang As New Central Bank Governor: WSJ

China has selected American-trained economist Yi Gang to become the country’s new central bank governor, the Wall Street Journal (WSJ) reported on Sunday, citing unnamed people with knowledge of the matter.

"American-trained." Oh oh. Hope he is not as clueless as the US Fed and conventional US academics.

OAN
China To Appoint Yi Gang As New Central Bank Governor: WSJ

Zhou Xiaochuan — The opening-up of Chinese economy - from manufacturing industry to service industry

Keynote speech by Mr Zhou Xiaochuan, Governor of the People's Bank of China, at the 2017 Lujiazui Forum "Financial reform and steady development from a global perspective", Shanghai, 21 June 2017.

Bank of International Settlements
Zhou Xiaochuan: The opening-up of Chinese economy - from manufacturing industry to service industry
Keynote speech by Mr Zhou Xiaochuan, Governor of the People's Bank of China, at the 2017 Lujiazui Forum "Financial reform and steady development from a global perspective", Shanghai, 21 June 2017.

David Nicklaus — China's worry about 'Minsky moment' may be a good sign

Randy Wray gets a mention.

St. Louts Post-Dispatch
Nicklaus: China's worry about 'Minsky moment' may be a good sign

David Nicklaus, business columnist for the St. Louis Post-Dispatch.

Reuters — China's central bank Anticipates a "Minsky moment."

Hyman Minsky goes to China.

China will fend off risks from excessive optimism that could lead to a "Minsky Moment", central bank governor Zhou Xiaochuan said on Thursday, adding that corporate debt levels are relatively high and household debt is rising too quickly.

A Minsky Moment is a sudden collapse of asset prices after a long period of growth, sparked by debt or currency pressures. The theory is named after economist Hyman Minsky....

"If there are too many pro-cyclical factors in the economy, cyclical fluctuations are magnified and there is excessive optimism during the period, accumulating contradictions that could lead to the so-called Minsky Moment," Zhou was speaking on the sidelines of China's 19th Communist Party congress.

"We should focus on preventing a dramatic adjustment," he said. China will control risks from sudden adjustments to asset bubbles and will seriously deal with disguised debt of local government financing vehicles, Zhou said....

CNBC

China's central bank just warned of a sudden collapse in asset prices

Reuters

Asia Times — PBOC’s Zhou says China will maintain proactive fiscal policy

Zhou Xiaochuan, President of the People’s Bank of China, said that the nation will continue to implement a proactive fiscal policy and a prudent monetary policy, and continue to fight shadow banking, the real estate bubble and other risks, China Securities Journal reported.
“China’s price level has remained stable, the foreign exchange market has ran smoothly and cross-border capital flows were balanced,” Zhou said. “China will further expand the financial industry, actively use new financial technology and tackle possible challenges.”

Asia Times

PBOC’s Zhou says China will maintain proactive fiscal policy

Staff

China Daily — PBOC inches closer to digital currency China Daily

The People's Bank of China, China's central bank, has completed trial runs on the algorithms needed for digital currency supply, taking it a step closer to addressing the technological challenges associated with digital currencies, according to a top official associated with the project.

Yao Qian, director-general of the Institute of Digital Money at the PBOC, said China's central bank has successfully designed a prototype that can regulate the supply of its future digital fiat currency.

The successful simulation of money supply paves the way for the central bank to become the future sole regulator and policymaker governing the value of digital fiat currency, said Yao.

Digital fiat currencies are the digital forms of a sovereign currency that is backed by the central bank.

Unlike Bitcoin or other digital money issued by the private sector, the digital fiat currency has the same legal status as the Chinese yuan, the only fiat currency issued by the People's Bank of China.

There is no timetable for the introduction of the currency, but once introduced, China is likely to become the first country that would deploy a digital fiat currency....

The rapid development of the electronic payment sector and thriving private digital currencies have made it imperative for China's central bank to move quickly in digital finance.

Looking ahead, deploying the digital fiat currency is expected to be smarter and more intelligent compared to the payment providers using existing currencies, such as Alipay, according to Yao.

Ecns.cn
PBOC inches closer to digital currency

China Daily

Andrew Batson — SDR inclusion as commitment device

Perhaps another way of putting this is that SDR inclusion is a commitment device. In addition to the practical concerns raised by Zhou, there would also be reputational costs to reversing exchange-rate and capital-account reforms. Since SDR inclusion is contingent on the IMF’s determination that the renminbi is “freely usable,” it could conceivably be reversed if the currency were to stop being freely usable. What future Chinese central bank governor will want to see headlines screaming “IMF expels renminbi from SDR”?

Of course, China over the past year has in fact been de-facto tightening capital controls by stepping up scrutiny of overseas M&A and slowing down approval of foreign-exchange transactions. But it has done so largely by using its regulatory discretion rather than changing formal rules. So perhaps the commitment device is working some....

Andrew Batson's Blog 

SDR inclusion as commitment device
Andrew Batson

Zero Hedge — PBOC Researcher: China Should Start Its Own Sovereign Digital Currency "As Soon As Possible"

Much more than the title suggests. Government is assserting its currrency sovereignty.

Zero Hedge

PBOC Researcher: China Should Start Its Own Sovereign Digital Currency "As Soon As Possible"

Tyler Durden

Timothy B. Lee — It looks like China is shutting down its blockchain economy

Looks like the central bank (PBOC) is asserting its control of currency.

As Yves Smith says, "prosecution futures."

Ars Technica
It looks like China is shutting down its blockchain economy

Timothy B. Lee

Martin Armstrong — China – A Different Central Bank Altogether

When I returned to the States, people I knew in the Fed and in Treasury called to ask me my opinion after these meetings with the Chinese government. I responded: It was great. They only hired people with experience!

Armstrong Economics
China – A Different Central Bank Altogether
Martin Armstrong

Reuters — PBOC adviser: bitcoin can be an asset but not a currency

Sheng Songcheng says bitcoin does not have attributes needed of a currency that can meet modern economic development needs….

He also said that Chinese monetary authorities should study issuing a central bank virtual currency that it can regulate and run properly.

Asia Times
PBOC adviser: bitcoin can be an asset but not a currency

Reuters

China Daily — Central bank: Boost economy using fiscal policy

The cycle of global quantitative easing is coming to an end and policymakers should rely more on fiscal policy to stimulate growth, Zhou Xiaochuan, China's central bank governor, said on Sunday.

Zhou warned about the overreliance on monetary easing and said that policy is not "a panacea that can cure all kinds of illness".

"The direction is to see the limit (of monetary policy) and to consider very carefully how to get out of the period of monetary easing," Zhou said at a panel discussion at the Boao Forum for Asia.

In addition, governments should improve balance sheets and fiscal positions to create more room for fiscal policy, he said....

The central bank governor said China has the flexibility in fiscal policy, as the debt level of the central government is not very high, and added the country needs to streamline the relationship between the central and local governments to ensure fiscal policy fits the local conditions.

Zhou saw inflation and asset bubbles as the "unintended consequence" of the monetary easing....

The central bank launched mortgage rules to cool the property market. Among them, raising the down payment requirement for buyers of a second home in Beijing to 60 percent of the price.

China.org.cn
Central bank: Boost economy using fiscal policy

China Daily

Also

China will be more open to foreign investment in its financial sectors, but the level of openness depends on compromises of all parties concerned during bilateral investment treaty (BIT) negotiations, said People's Bank of China governor Zhou Xiaochuan on Sunday.

Speaking during the Boao Forum for Asia, Zhou stated China has prepared, in its BIT negotiations with the US and its trade talks with European and ASEAN countries, to take even more significant steps to open up its banking, insurance, investment banking, securities and payments sectors.

However, he noted that China hopes Chinese investors, particularly those in private sectors, can gain fair treatment overseas after it opens up its financial sectors. The governor added that China's attempts to import high-technology in at least civilian sectors should be allowed.

"Each party should make some compromises. Only then can globalization move forward and all benefit from it," said Zhou.

China will substantially cut the number of sectors on the negative list which are not open to foreign investment and offer foreign investors fair treatment in its 11 free trade zones, according to Zhou.

The governor also mentioned U.S. President Donald Trump's call for a "big border tax" on imports or the Border Adjustment Tax (BAT), which has been a topic of much discussion around the world. It is believed that BAT will lead to the appreciation of the U.S. dollar by 20 to 25 percent.

Bai Chongen, a Tsinghua University professor and member of the central bank monetary policy committee, suggested further openness in foreign direct investment be considered to reduce the negative impact of the U.S. tax reform on China.

Zhou indicated that it remains to be seen whether or not the U.S. will implement BAT in its tax reform. He said China has prepared for further openness in recent years, but its openness is not directly connected with the foreign exchange rate.

The governor noted that China is waiting to see how the Trump administration approaches trade and investment negotiations. Meanwhile, China is actively negotiating with Japan, European and ASEAN countries to achieve positive results as early as possible.

Ecns
PBOC governor: China’s financial openness depends on BIT negotiations
CGTN

OANN — China should stop intervening in FX market and let yuan float: researcher

China should stop intervening in the foreign exchange market, devalue the yuan and let it float freely to restore stability, a senior researcher at a government-backed think tank said.
Xiao Lisheng, a finance expert with the Chinese Academy of Social Sciences, made the remarks in an article on Monday in the official China Securities Journal amid a growing debate among the country’s economists on whether authorities should let the closely-managed currency trade more freely.

The yuan lost 6.6 percent against the dollar last year, the biggest annual loss since 1994.
“The more the government delays the release of depreciation pressure, the greater the impact and destructive power of the release of depreciation pressure will be,” Xiao wrote.

The authorities should “let the yuan exchange rate have a one-off adjustment to realize a free float” of the currency, he said.…

Cut it loose.

One America News Network
China should stop intervening in FX market and let yuan float: researcher

Reporting by Winni Zhou and John Ruwitch; Editing by Kim Coghill

Zero Hedge — Chinese Overnight Funding Rate Hits Unprecedented 105%

It appears Chinese authorities are deadly serious about crushing shorts and halting speculative outflows as the liquidity freeze in Chinese markets has sent overnight deposit rates to a record 105% as one or more bank's utter desperation for funds looks like a giant fat finger.

Today's spike is up 45 percentage points from yesterday's 60% rate...

Zero Hedge

Chinese Overnight Funding Rate Hits Unprecedented 105%

Tyler Durden