China will stress test Asia as rarely before in 2024

Today’s extreme focus on the Bank of Japan is pivoting to how the People’s Bank of China plays the economic minefield that lies ahead in 2024. Over the next 12 months, China will stress test Asian economies as rarely before. Beijing’s dueling priorities of stabilizing growth and reducing the frequency of boom/bust cycles will center on the actions of Governor Pan Gongsheng at PBOC headquarters. Since taking the PBOC’s reins in July, Pan has been a study in monetary restraint. Even as the all-important property sector stumbles, Pan’s team has avoided channeling giant waves of liquidity into the market. Targeted blasts, yes. But Team Pan is foregoing the powerful easing moves that traders came to expect from previous PBOC leaders. One reason is that the yuan is under growing pressure in global markets. Nothing would get China closer to this year’s 5% growth target faster than a lower exchange rate. Pan, though, is prioritizing yuan stability over stimulus in ways that continue to confound hedge funds betting on a weaker currency.