Michael Every, Head of Financial Markets at Rabobank, suggests that the Chinese National People’s Congress meets to discuss the next 5-Year Plan and there is a strong belief we will see further statements about currency stability to back up the PBoC. Key Quotes “However, genuinely stabilizing CNY will require action on another front: zombies. In short, until unprofitable SOEs plagued with overcapacity are restructured, Chinese growth will continue to grind lower and a chunk of domestic capital will continue to look for better investment opportunities offshore. In that regard, the details of the next Plan are arguably critical for the overall outlook. China successfully performed this kind of structural ‘pruning’ back in the late 1990s but now seems more timid given the weaker local/global growth backdrop: as the WSJ reports, the authorities are talking about cutting 150m tons of steel capacity by 2020, for example, when the annual surplus is already 400m tons (and as US steel tariffs announced this week make matters worse). At the same time, the 5-Year Plan may also offer incentives to lure foreign capital in. Yet after the debacle in stocks last year that might be hard to achieve, especially with a local bond bubble now at risk of bursting too as a wall of hot money sloshes back into Tier-1 city property instead, Shenzhen house prices soaring 52% y-o-y(!) as just one indication of the madding crowd that one should ideally be staying far from.” For more information, read our latest forex news.