FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, notes that the sell-off in the Chinese equity market has extended further (down another 5%) alongside weakness in other Asian equity markets. Key Quotes “In contrast, the renminbi in both the onshore and offshore markets has strengthened modestly overnight. It follows the PBoC’s decision to set the daily fix for USD/CNY marginally lower for the second consecutive day. The Chinese authorities appear to be providing more support for the renminbi in recent days likely in an attempt to dampen building expectations for a sharper devaluation ahead. Guan Tao who is head of international payments at the State Administration of Foreign Exchange (SAFE) stated in an interview with the Economic Daily today that “the market should not be worried by loud noises talking down the renminbi by some overseas institutions”. Still global investors remain wary that recent renminbi and domestic equity market weakness are signalling a potentially sharper economic slowdown in China posing downside risks for the outlook for global growth. Comments as well over the weekend from Li Wei who is President of the State Council’s development Research Centre have highlighted economic growth concerns. He stated that China will face great difficulty in achieving economic growth above 6.5% over the 2016-2020 period due to slowing global demand, rising labour costs at home, and growing environmental concerns which meant that the country could not industrialize arable land at as rapid a pace as before. The latest CPI and PPI reports revealed that inflation continues to remain subdued in China leaving scope ease monetary policy further to support growth. The annual rate of headline consumer price inflation accelerated marginally to 1.6% in December remaining well below the government’s target of 3.0% for the year. The annual rate of producer price inflation remained deeply in deflationary territory at -5.9% in December. A further easing of monetary policy would keep downward pressure on the renminbi in the year ahead.” For more information, read our latest forex news.