📍PBOC signals long-term support for CNY

📌 PBOC continues to signal abundant liquidity, prioritizing stable growth and price control, while also reducing financial costs for the real economy -> The familiar cross-cyclical thinking in the two recent five-year plans of the Chinese Communist Party.

📌 Each time USD pressure increases, PBOC intervenes softly through state-owned banks, limiting USD purchases, and keeping the exchange rate within a range. Whenever CNY/USD hits the PBOC midpoint, they will intervene strongly immediately.

📌 But the problem is not only about USD. Europe believes that CNY is too weak against EUR. This puts China in a difficult position:
- CNY cannot strengthen too much against USD -> squeezing exports, suppressing growth.
- Nor can it be too weak against EUR -> risk of being accused of currency manipulation, causing trade tensions.

-> PBOC is using FX as a valve to maintain domestic stability while the world’s currency fragmentation becomes increasingly clear.