Offshore yuan falls to seven-month low

The yuan fell to a seven-month low in offshore intraday trading yesterday, signalling a vote of no confidence in Beijing's vow to maintain annual economic growth at 7.5 per cent and a sign of concern over the mainland's lending and credit risks.

Premier Li Keqiang called for a "balanced" monetary policy, a change in tone and in contrast to the "prudent" monetary policy used last year in opening the annual session of the national legislature in Beijing.

That soon sparked concerns among offshore investors whether it means Beijing would open the credit tap to shore up growth, a move that would provide a short-term boost to the economy but could further worsen the already significant debt problems in the country.

"We do not expect the weakening in the exchange rates to trigger a crisis, but we are concerned about credit risks as trust funds are about to enter the repayment peak season," said Credit Suisse research analyst Dong Tao.

A third of the outstanding 4.6 trillion yuan (HK$5.8 trillion) in trust loans are due to mature this year, with more than 500 billion yuan of such products set to mature in the second quarter alone.

The yuan touched 6.1383 against the US dollar in offshore trade yesterday morning, its weakest level since July last year, before strengthening in the afternoon.