China: G20 trumps SDR - MUFG

Leong Sook Mei, ASEAN Head of Global Markets Research at MUFG, suggests that their judgment is the G20 is much more important to top Chinese leadership than SDR entry.

Key Quotes

“Put it this way: The G20 is a Xi Jinping thing while the SDR is a Zhou Xiaochuan thing. And in China these days, Xi trumps just about anybody else. Further, SDR entry is a done deal; there's not much China can do on the currency front to mess up this coming-of-age Kodak moment.

So after the G20 leave, China may keep up stage management a little longer, but eventually such actions should become less aggressive. It was interesting CFETS ticked higher, suggesting at least that someone on the Chinese side thinks the G20 may care about the RMB's basket depreciation. If pricing of a September Fed hike boosts USD, this past Monday's fixing suggested PBOC will resist. But we don't expect RHS demand to go away post-G20 and with less stage management, we retain a bullish bias. The official manufacturing PMI ticked up in August but steel rebar prices fell, reflecting cautious steel company outlooks into 2017.”