USD/CNY: Potential recapitalization in financial sector – MUFG
Unconfirmed reports suggest that China may inject RMB 200 billion into large insurers to bolster their capital buffers, alongside an additional RMB 300 billion into major banks. This move aims to support the banking sector amid downward pressure on net interest margins.

Unconfirmed reports suggest that China may inject RMB 200 billion into large insurers to bolster their capital buffers, alongside an additional RMB 300 billion into major banks. This move aims to support the banking sector amid downward pressure on net interest margins. The PBoC's USD/CNY fixing has remained below the 7.0000 level, aided by a weaker Dollar, note Lin Li, Asian Head of Global Markets Research and Khang Sek Lee, Research Associate at MUFG Bank.

Government support for banking sector

"If true, it is considered timely as the China Banking and Insurance News reported in November that more than two-thirds of the 173 insurers that have reported experienced a decline in their solvency ratios in 3Q from the prior quarter."

"Currency wise, the PBoC USD/CNY fixing has firmly remained below 7.0000 level this week partially helped by a weaker dollar, following the breakthrough of the level last Friday."

"Looking ahead, we think the RMB appreciation (if the market determines so) will be a modest one guided by PBoC USD/CNY fixing to avoid overshooting risks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

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