YUETONG FASTENERS

Expert: FX swings could shape rates

More stimulus steps possible on back of low inflation, negative output gap China would still have scope for more interest rate cuts in the coming months if the People's Bank of China, the country's central bank, shows it is willing to tolerate and deal with more fluctuations of the renminbi exchange rate, said a leading currency expert. Guan Tao, global chief economist at BOC International, told China Daily the country has considerable leeway to ramp up fiscal and monetary stimuli given its domestic economic condition that is characterized by low inflation and a negative output gap (where the economy's actual output is less than its potential output). From an external perspective, however, cutting interest rates further may inevitably aggravate the downward pressure on the renminbi in the short term unless the cut can immediately improve market expectations and brighten economic prospects, said Guan, who had served as head of the Balance of Payments Department at the State Administration of Foreign Exchange in the past. "As dollar-denominated assets are high-yield assets, a widening US-China interest rate differential could still exert pressure on the renminbi even if the US Federal Reserve does not raise interest rates further," he said. The renminbi's future movements against the greenback, according to Guan, will hinge on changes in China's economic momentum, US monetary policy, the dollar's strength and the PBOC's foreign exchange policy. Meanwhile, financial market experts are keeping a close watch on how the PBOC will adjust its monetary policy to solidify a nascent pickup in economic momentum, amid lingering uncertainty over the US Fed's rate hikes. Most traders said they expect the Fed to hold rates unchanged next week, but are looking forward to US inflation data to be released on Wednesday to make their predictions. Despite the headwinds of the aggressive Fed's record interest rate hikes, the PBOC cut a key interest rate in June and August by 25 basis points in total, while using a variety of tools to prevent excessive renminbi depreciation, including allowing more foreign debt and releasing banks' foreign exchange required reserves. After the onshore renminbi hit a 16-year low of 7.3510 per dollar on Friday, the PBOC reiterated its intention to forestall any overshooting of the exchange rate and, in a statement on Monday, said that it won't hesitate to correct any one-sided, pro-cyclical behavior. "If previous renminbi exchange rate adjustments have fairly priced in various unfavorable factors, then the currency does not necessarily need a bottoming-out economy to stabilize," Guan said. "Even marginal improvements in expectations would still give a significant boost to exchange rates," he said, adding that a pickup in lending figures for August has helped fuel a rally in the renminbi on Monday, when the onshore renminbi strengthened by 509 basis points to close at 7.2906 per dollar. Echoing Guan's remarks, Wang Tao, chief China economist at UBS Investment Bank, said the renminbi could slightly strengthen against the greenback by the end of the year. More time is needed to judge the sustainability of recent marginal improvements in economic data, Guan said, adding that authorities' approach to tackling economic shocks now is fundamentally different from the one they had adopted in 2008 during the Global Financial Crisis. While the stimulus-led 2008 policy turbocharged short-term economic growth, it also resulted in long-term structural distortions, including debt pileup, overcapacity and asset bubbles, which the Chinese economy is still grappling with, he said. "Therefore, fewer strong stimulus measures were launched this time," Guan said. "The main focus now is on structural adjustments, with necessary fiscal and monetary support to protect the economy from sliding out of a reasonable range. But, aggressive moves like increasing fiscal deficits or issuing special treasury bonds are avoided." This approach will help the country to stay true to its commitment to high-quality development and lay a more solid foundation for long-term growth; yet, the price would be lower growth in the short term, Guan said. He further said recent measures taken to promote structural adjustments and nurture innovation-led new growth engines are crucial for China to fend off any potential risk of going down Japan's path to "the lost decades". "The Chinese economy is not facing the kind of risks that Japan had encountered, but we need to stay vigilant against the possibility of entering that sort of situation and take preemptive measures," Guan said.

2023-09-13

Huawei set to make waves with advanced chip

Huawei Technologies is a front-runner again in the smartphone market with a new phone powered by an advanced chip despite sweeping US sanctions, which may have a ripple effect on both Chinese and US semiconductor industries, experts say. The new handset, Mate 60 Pro, uses a 5G application processor which represents "a made-in-China design and manufacturing milestone", according to a teardown by a team from industry research company TechInsights. The team believes the 7-nanometer processor was manufactured by China's leading chip foundry, Semiconductor Manufacturing International Corporation, or SMIC. It "demonstrates the technical progress China's semiconductor industry has been able to make without EUV (extreme-ultraviolet) lithography tools," said Dan Hutcheson, vice-chair of TechInsights. "The difficulty of this achievement also shows the resilience of the country's chip technological ability." The most cutting-edge EUV machines are used to manufacture advanced chips. SMIC has no access to EUV machines because of US export controls. Industry experts said it could use some older equipment to make advanced chips. Huawei has been on the United States Commerce Department's Entity List, which restricts its access to US technologies, since May 2019. The new phone's self-developed 5G chipset, the operating system HarmonyOS, and other technical differences from its competitors, show that "Huawei is back after three years in the wilderness", said George Koo, a retired international business adviser in Silicon Valley. Huawei has not disclosed how it has achieved the necessary technological advances. Koo believes the achievement would not be possible without partners in China and a domestic supply chain, from design software and semiconductor fabrication to essential chemicals and materials. What Huawei accomplished will ripple through China's semiconductor industry, Koo said. "Huawei's experience will facilitate and encourage others to follow. China's self-sufficiency in semiconductors will only increase." Tech breakthroughs Huawei's technological advances have prompted some US lawmakers to call for tougher restrictions. Wisconsin Republican Representative Mike Gallagher, chairman of the House Select Committee on Competition with China, suggested the US should end all its exports to both Huawei and SMIC — even those involving older technologies that are currently allowed under the law. California-based chip developer Qualcomm was able to obtain export licenses from the government to provide Huawei with older generation 4G chips. China accounts for roughly two-thirds of Qualcomm's revenue. Qualcomm's stock plunged 7.2 percent to $106.40 on Thursday on the latest news, alongside shares of other cellphone suppliers, Bloomberg reported. "America's shortsighted strategy to decouple from China will devastate the revenue of leading US providers of advanced chips such as Nvidia and Qualcomm and manufacturers of chipmaking equipment such as Applied Materials and Lam Research," said Koo. "These companies will see their comparative advantages dry up. In the near term, they are not allowed to sell to China. In the long term, China will not need to buy from them." The technological breakthrough was expected to help Huawei in its home market, especially in competition against Apple, according to Bank of America Securities. "If Huawei has the capability to supply and scale its homegrown Kirin 9000S (chip), we see the Mate series phone as an opportunity for Huawei to increase its shipments and regain its market share, potentially posing downside risk to iPhone sales, especially in the Asia-Pacific," analysts at BofA Securities wrote in a research note last week.

2023-09-11

China aims to industrialize superconducting materials, graphene

2023-08-29

Welcome to participate in the 134th Canton Fair International Pavilion

Welcome to participate in the 134th Canton Fair International Pavilion

2023-08-24

The 14th China Northeast Asia Expo was held in Changchun, Jilin Province

2023-08-24

Netherlands' chip rules to hit global supply chains

Netherlands' chip rules to hit global supply chains

2023-07-03