China: Status quo ante - Rabobank

Research Team at Rabobank, suggests that China isn't used to taking second place in Asia on any front but after dominating global market fears in early January, Beijing was subsequently pushed into the background by developments in Japan, where negative interest rates became the latest reason for panic.

Key Quotes

“Yet that status quo reversal is unlikely to last long. Things in China remain deeply concerning despite the recent stability in USD/CNY (which has benefitted from the rollback of bullish USD bets alongside a more reticent Fed). The economy continues to slow based on survey evidence available, such as the MNI business survey and that picture is likely to be repeated.

As concerning are the mixed messages that we are getting from the PBoC. The fact that the PBoC has room to cut rates further is also hardly a surprise. Indeed, the prospect of a Chinese rate cut leans strongly against Zhou's concurrent repetition of the message that there is "no basis for sustained CNY depreciation". Moreover, if that is the case one has to wonder why the PBoC recently removed the “Position for forex purchase” data series from its website, which tracks total FX purchases (i.e., capital outflows) by itself and other Chinese financial institutions: instead it only released the data regarding its FX purchases.”