China’s financial system is “largely stable and healthy,” the country’s foreign exchange regulator said at the weekend in an effort to reassure global markets as investors braced for a possible resumption of last week’s market turmoil.
Attention is likely to focus on China’s central bank and its management of the renminbi this week, after the markets regulator appeared to stabilise last week’s stock sell-off by scrapping a controversial “circuit breaker” mechanism and extending a ban on share sales by large shareholders.
The renminbi fell 1.5 per cent against the dollar in onshore trading last week to Rmb6.59 — a sharp move for the carefully managed currency. Traders have largely ignored the central bank’s guidance that they should focus on the renminbi’s stability against a basket of 13 currencies rather than volatility against the dollar.