China's major state-owned banks moved to support the yuan on Monday, tightening liquidity in the offshore foreign exchange market while actively selling US dollars onshore as equities slid, Reuters reported, citing four sources with knowledge of the matter.
The goal was to prevent the yuan from falling too fast as China's A shares plunged, said one of the people, with the benchmark Shanghai Composite index posting its biggest one-day drop since April 2022 on Monday, down 2.7%.
Overseas funds have sold roughly $1.6 billion in Chinese equities so far this year, with investor confidence bruised by signs of slowdown in the world's second largest economy.
Also on Monday, the People’s Bank of China kept its loan prime rates unchanged despite concerns over a property sector downturn and weak investor sentiment.
The one-year and five-year lending rates will remain at 3.45% and 4.2%, respectively, according to an announcement from the PBoC.
The move was in line with expectations.