China Flags More Policy Measures to Bolster Yuan

 People shop around for prosperity decorations for the upcoming Chinese Lunar New Year, at a New Year Bazaar in Beijing, Monday, Jan. 13, 2025. (AP)
People shop around for prosperity decorations for the upcoming Chinese Lunar New Year, at a New Year Bazaar in Beijing, Monday, Jan. 13, 2025. (AP)
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China Flags More Policy Measures to Bolster Yuan

 People shop around for prosperity decorations for the upcoming Chinese Lunar New Year, at a New Year Bazaar in Beijing, Monday, Jan. 13, 2025. (AP)
People shop around for prosperity decorations for the upcoming Chinese Lunar New Year, at a New Year Bazaar in Beijing, Monday, Jan. 13, 2025. (AP)

China announced more tools to support its weak currency on Monday, unveiling plans to park more dollars in Hong Kong to bolster the yuan and to improve capital flows by allowing companies to borrow more overseas.

A dominant dollar, sliding Chinese bond yields and the threat of higher trade barriers when Donald Trump begins his US presidency next week have left the yuan wallowing around 16-month lows, spurring the central bank into action.

The People's Bank of China (PBOC) has tried other means to arrest the sliding yuan since late last year, including warnings against speculative moves and efforts to shore up yields.

On Monday, authorities warned again against speculating against the yuan. The PBOC raised the limits for offshore borrowings by companies, ostensibly to allow more foreign exchange to flow in.

PBOC Governor Pan Gongsheng meanwhile told the Asia Financial Forum in Hong Kong that the central bank will substantially increase the proportion of China's foreign exchange reserves in Hong Kong, without providing details.

China's foreign reserves stood at around $3.2 trillion at the end of December. Not much is known about where the reserves are invested.

"Today's comments from the PBOC indicate that currency stability remains an important priority for the central bank, despite the market often discussing the possibility of intentional devaluation to offset tariffs," said Lynn Song, chief economist for Greater China at ING.

"Increasing China's foreign reserves will give more ammunition to defend the currency if the market situation eventually necessitates it."

China's onshore yuan traded at 7.3318 per dollar as of 0450 GMT on Monday, not far from a 16-month low of 7.3328 hit on Friday.

It has lost more than 3% to the dollar since the US election in early November, on worries that Trump's threats of fresh trade tariffs will heap more pressure on the struggling Chinese economy.

The central bank has been setting its official midpoint guidance on the firmer side of market projections since mid-November, which analysts say is a sign of unease over the yuan's decline.

Monday's announcements underscore the PBOC's challenges and its juggling act as it seeks to revive economic growth by keeping cash conditions easy, while also trying to douse a runaway bond rally and simultaneously stabilize the currency amid political and economic uncertainty.

It has in recent days unveiled other measures. In efforts to prevent yields from falling too much and to control circulation of yuan offshore, it said it is suspending treasury bond purchases but plans to issue huge amounts of bills in Hong Kong.

Gary Ng, senior economist at Natixis, said while China's onshore market has a much better pool of yuan deposits, Hong Kong plays a "significant role with higher turnover driven by FX swaps and spot transactions."

"This means that Hong Kong can be a venue for supporting the yuan through trading activities and potential investments."

Data on Monday showed China's exports gained momentum in December, with imports also showing recovery, although the export spike at the year-end was in part fueled by factories rushing inventory overseas as they braced for increased trade risks under a Trump presidency.



Saudi Arabia Strengthens Private Sector Collaboration at PIF Forum

Gatherers at the second edition of the PIF and Private Sector Forum. (PIF and Private Sector Forum)
Gatherers at the second edition of the PIF and Private Sector Forum. (PIF and Private Sector Forum)
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Saudi Arabia Strengthens Private Sector Collaboration at PIF Forum

Gatherers at the second edition of the PIF and Private Sector Forum. (PIF and Private Sector Forum)
Gatherers at the second edition of the PIF and Private Sector Forum. (PIF and Private Sector Forum)

Saudi Arabia is intensifying efforts to boost private sector contributions to its economy and attract foreign investments, aligning with Vision 2030’s goal of reducing reliance on oil. The Public Investment Fund (PIF) plays a pivotal role in this transformation by fostering an attractive investment climate and establishing new economic sectors.

A key platform driving this initiative is the 2025 PIF and Private Sector Forum, which launches on Wednesday in its third edition. The forum serves as a bridge between PIF, its subsidiaries, and private enterprises, reinforcing partnerships to accelerate economic diversification.

The Kingdom aims to increase the private sector’s share of GDP to 65% by 2030. To achieve this goal, the government has implemented economic reforms to enhance business operations, digitize government services and create financing programs, incubators and accelerators to support private enterprises.

PIF has been instrumental in unlocking previously untapped non-oil sectors, providing new investment opportunities. Local businesses have capitalized on these developments, contributing to sectoral growth and national economic expansion.

Private sector contribution

Since the launch of Vision 2030, Saudi Arabia has made significant strides in attracting foreign investments and bolstering private sector activity. In January 2025, the Kingdom’s non-oil economy recorded its strongest performance in over a decade.

The Riyad Bank Purchasing Managers’ Index (PMI) surged from 58.4 in December 2024 to 60.5 in January 2025, marking its highest level since September 2014. The PMI, a key economic indicator, reflects improvements in private sector conditions.

The country’s economy grew by 1.3% in 2024, driven by a 4.3% expansion in non-oil activities, while the oil sector experienced contraction. The Ministry of Finance had projected a 0.8% GDP growth for the year, while the International Monetary Fund (IMF) estimated a 1.4% expansion.

Managing assets worth approximately $930 billion, PIF plans to reduce its international investment share from 30% to 18-20%, emphasizing domestic development projects.

“Most of PIF’s investments focus on national development initiatives,” stated PIF Governor Yasir Al-Rumayyan at the Future Investment Initiative conference.

Strategic sectors

Dr. Moodhi Al-Otaibi, Assistant Professor of Economics at Al Yamamah University, highlighted PIF’s essential role in achieving Vision 2030 through active contributions to local and global economic frameworks. This has positioned Saudi Arabia as a leading investment hub, fostering economic transformation and private sector growth.

She emphasized the private sector as the Kingdom’s long-term strategic partner, noting PIF’s commitment to enhancing local content. The fund focuses on 13 key industries, including housing, tourism, hospitality and entertainment, while also driving innovation.

PIF’s investment portfolio includes 99 companies that have significantly contributed to localization and economic diversification. The fund has introduced several targeted initiatives, such as Mosaahama (Contribution), Business Accelerator, and the PIF SME Program, to empower private enterprises and connect them with emerging opportunities.

The PIF and Private Sector Forum has seen rapid growth in participation over its past two editions. Attendee numbers surged from 4,000 in 2023 to 9,000 in 2024, while the number of PIF portfolio company booths expanded from 50 to 83. The forum also facilitated agreements and memorandums of understanding worth approximately SAR 17 billion ($4.5 billion).

The 2025 edition is expected to host 1,000 high-profile participants from public and private sectors. Over 120 speakers will take part in discussions, with extensive media coverage from more than 40 local and international outlets.