China Central Bank Heeds Xi Call To Fight US ‘Containment’

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(Bloomberg) — China’s central bank echoed President Xi Jinping’s that the United States was trying to stifle the world’s second-largest economy, an unusual move that suggests the central bank is looking for ways to safeguard against potential sanctions. Searching

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In a statement Wednesday, the People’s Bank of China laid out plans to “appropriately respond to the control and repression of the US and other Western countries” after a meeting to study Xi’s speeches during the National People’s Congress session, which began on Monday. ended.

The PBOC repeated Xi’s rare direct criticism of the US last week, saying the policies of the US and others pose “unprecedented and serious challenges” to China’s economy. The US has banned major Chinese firms from accessing American technology such as advanced chips, with Xi taking steps to make the economy more self-sufficient in those areas.

It is common for government ministries and agencies to hold meetings after major Communist Party and state events to show their support for major policies. However, the PBOC’s comments were unusual in repeating Xi’s criticism of US “containment”, which was not used in official statements published by other departments on Wednesday.

“It’s a really very strange statement for a central bank,” said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA. “My understanding is that the central bank is preparing for possible sanctions,” she said, adding that China could face possible penalties from the US if Beijing provides military aid to Russia.

Under Xi, last week secured an unprecedented third term as president, the Communist Party has sought to increasingly centralize policy-making. Premier Li Keqiang said on Tuesday at his first State Council meeting since taking office that the government-running body is “first and foremost a political organ” and urged participants to endorse Xi’s supreme leadership. requested to implement the instructions.

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Duncan Wrigley, chief China economist at Pantheon Macroeconomics Ltd., pointed out that the PBOC’s statement emanated from a gathering convened by the Communist Party Committee of the central bank, rather than a “work” meeting on issues such as monetary policy. “It is common for such comments – which are basically the viewpoints and concerns of the national CCP – to be transmitted at party committee meetings of the PBOC and elsewhere in the public domain,” he said.

The PBOC did not elaborate on what measures it might take to protect the economy from US “containment”. Some of the possible actions, analysts said, include boosting financing support for tech companies, strengthening China’s cross-border payments system — known by its acronym CIPS — and diversifying the country’s $3 trillion foreign exchange holdings. is included.

US-China tensions have escalated in recent months, particularly over advanced technologies. The Biden administration has expanded export restrictions to block Chinese firms’ access to US technology, while also rallying allies such as Japan and the Netherlands to restrict exports of some chip-making machinery to China.

Xing Zhaopeng, senior China strategist at Australia and Zealand Banking Group Ltd, said the PBOC’s pledge “will be primarily manifested in financial support for technology and innovation.”

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To support domestic tech champions, the PBOC could potentially extend or extend a 200 billion yuan refinancing program launched last year, which incentivises bank loans to tech firms, he said. There may also be more supportive measures for financing tech companies through equity and bonds.

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Herrero said that if sanctions are imposed on China by Western countries for providing military aid to Russia, the PBOC may announce that CIPS – China’s cross-border interbank yuan payment system – will operate without the use of the SWIFT messaging system. which dominates global banking transactions.

Some Russian lenders were banned from using SWIFT after the nation was approved, effectively locking them out of the international banking system.

external shocks

In a separate statement on Wednesday, the State Administration of Foreign Exchange, the country’s foreign exchange regulator, pledged to pursue the opening of China’s capital accounts and prevent “risks of external shocks”.

The PBOC’s statement also addressed concerns about financial stability. It vowed to “well-manage the pace of credit expansion”, ensure credit growth remains “reasonable” and do its best to stabilize growth, employment and prices, according to the statement.

The meeting was chaired by PBOC party secretary Guo Shuqing and attended by Governor Yi Gang, was reappointed to his post over the weekend.

With global financial markets in turmoil following the collapse of Silicon Valley Bank, the PBOC pledged to strengthen the financial system to ensure stability and improve contingency plans. It also reaffirmed its pledge to increase support for private and small companies and push for the stable and healthy development of the property market.

– With assistance from Jing Li, Fran Wang and Lucille Liu.

(Updated with analyst comment in sixth paragraph.)

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