In an exclusive report on January 6, insiders revealed that the People’s Bank of China (PBOC) will issue offshore central bank bills in Hong Kong this January. This marks the first time since 2019 that the PBOC will be issuing additional bills without any maturing bills. Industry experts consider the issuance of central bank bills in January to be quite rare.
According to reports from mainland media outlet “Caijing” on January 7, the PBOC will increase the issuance of offshore renminbi central bank bills in Hong Kong this January, with the expected scale far exceeding previous single issuance sizes.
In response to this, Liu Jie, the Director of Macro Strategy at Standard Chartered China, told the media, “The issuance of central bank bills in January is very rare, especially since there have been no maturing bills recently. This shows the determination of the central bank to stabilize the exchange rate.” She noted that this would be the first time since 2019 that additional issuance is taking place without maturing bills. Previously, the PBOC began increasing the issuance of offshore central bank bills in July 2023, which resulted in a net inflow of 60 billion RMB over six quarters, raising the offshore central bank bill balance from 80 billion RMB in the first half of 2023 to 140 billion RMB by the end of 2024.
Central bank bills, also known as central bank notes, are short-term debt instruments issued by central banks to regulate excess reserves of commercial banks. The issuance of offshore central bank bills by the Chinese authorities aims to tighten renminbi liquidity in offshore markets and stabilize the exchange rate.
At the start of the new year in 2025, the renminbi exchange rate against the US dollar fell below key levels of 7.3 and 7.35 renminbi to 1 US dollar. Particularly on January 6 at 16:30 Beijing time, the trading of the US dollar against the onshore renminbi hovered near 7.3567, briefly touching the upper limit of the 2% fluctuation range. Foreign exchange traders told “Caijing” that due to the 2% fluctuation band around the central parity, breaching the upper limit would prevent trading renminbi at a weaker price.
Several forex traders and strategists stated that the sudden decline of offshore renminbi (since the end of December 2024) has weakened the exchange rate. If central bank bills are issued, liquidity in the offshore renminbi market may tighten, and the spot exchange rate of the US dollar against the renminbi may not significantly weaken in the short term.
Liu Jie said, “Before the new policies of the Trump administration, we expected the US dollar to fall below 7.35 against the renminbi. The recent strengthening of liquidity management and counter-cyclical adjustments by the central bank in the offshore market indicates the intention to maintain a stable renminbi exchange rate.”
Kamakshya Trivedi, Head of Global Currency, Interest Rate, and Emerging Markets Strategy at Goldman Sachs, pointed out that based on their baseline forecast, “The renminbi is expected to weaken further, with the US dollar rising to 7.40 against the renminbi within the next 3 months, stabilizing around 7.50 within 6 to 12 months.”
In a statement to The Epoch Times, political and economic observers noted that the downward trend of the renminbi has become an unavoidable reality.
The renminbi has depreciated for three consecutive years. Looking at the overall trend of the renminbi against the US dollar in 2024, the renminbi fell from 7.0920 to 7.2988 against the US dollar, a decline of 2,068 basis points. In terms of the central parity, the renminbi against the US dollar fell from 7.0827 to 7.1884 in 2024, a cumulative decline of 1,057 basis points, representing a full-year drop of 1.49%.