PBOC officials, led by Governor Zhou Xiaochuan, had for years promoted liberalization of the yuan, trying to boost its role in the global financial system. In 2015, the International Monetary Fund approved it as an official reserve currency, deciding the yuan met the standard of being “freely usable.” Weeks later, Chinese officials squeezed a budding yuan market in Hong Kong to deter speculators, a move that crippled interest in offshore deposits and yuan-bond issuance in the territory.
Chalk up another win for the visible hand in China’s markets over the principle of the private sector determining prices. A move by authorities to smooth out daily changes in the yuan’s fixing versus the dollar, taken on its own, suggests a shift away from any eventual float of the currency. The news comes in a week when officials were suspected of having intervened in the stock market to limit damage to sentiment after Moody’s Investors Service downgraded China’s sovereign credit rating.
For all the verbiage from Chinese officials on the need to rein in leverage and open markets to global investors, the nation’s leadership got a double dose of caution on Wednesday. Moody’s Investors Service unveiled a surprise downgrade of China’s sovereign rating, citing concerns about its continued buildup of Earlier, the head of one of the world’s top stock-index compilers suggested had more work to do to get its onshore stocks into emerging-market gauges.