The People’s Bank of China has reportedly ordered certain commercial banks to balance their monthly outbound RMB payments and inbound RMB receipts, noted Scotiabank in a research report. Offshore yuan funding costs are likely to rise again as long as the weakening pressure on the yuan deepens in the future that would then help ease market worries and steady the yuan exchange rate afterwards.

During the end of November 2016, the Chinese central bank stated that it might extend the implementation of macro prudential assessment system to cross-border RMB settlement. The move is targeted at cracking down continuous outbound RMB payments identified for a major purpose of buying foreign currencies in offshore yuan markets, stated Scotiabank.

The latest SAFE data showed that mainland China has recorded net outbound RMB payments every month beginning October 2015 in the midst of increasing downward pressure on the yuan. The central bank, during November end promulgated the Notification on Further Clarifications on Overseas RMB Loans by Domestic Enterprises.

“In the months ahead, we believe the central bank will raise interbank yuan funding costs particularly in offshore market if necessary to curb one-way speculation over the yuan depreciation”, said Scotiabank.

In the meantime, the central bank is likely to keep medium-and long-term funding costs at affordable levels to boost the economy via unconventional monetary policy tools such as the PSL and MLF. The PBoC is expected to keep the yuan basket quite stable at current stage, while tolerating a more flexible USD/CNY fixing, added Scotiabank.