Chinese share markets bounced higher on Friday morning at the end of a week of sudden falls, while Beijing tried to reassure the world it would not use a lower yuan to wage a trade war. The benchmark Shanghai Composite Index was up 2 percent at the midsession interval, while the CSI300 index of the largest listed companies in Shanghai and Shenzhen added 2.3 percent. Investors remain wary, however, as the indexes have a habit of sliding late in the session, often for no apparent reason, and have lost about 23 percent this month or 12 trillion yuan ($1.8 trillion). More broadly, China's economic growth, which slowed to a 25-year low last year and has put pressure on the yuan currency as capital flows out of the country, is giving investors pause. The People's Bank of China (PBOC) did its part to keep the banking system flush with cash, pumping out a huge 690 billion yuan this week to avoid a liquidity crunch ahead of the Lunar New Year celebrations beginning in early February. Late on Thursday, the central bank announced it would conduct more liquidity operations than usual between Jan. 29 and Feb. 19 to keep the system awash with cash through the holiday period. The PBOC also seems to have succeeded in calming market concerns about an imminent devaluation in the yuan, though many analysts still suspect the currency will be allowed to trickle lower over time. The central bank held the yuan's daily midpoint fixing steady at 6.5516 per dollar on Friday, dimming memories of the surprisingly lower fix that so spooked markets early in the month. In the latest move to stem pressure on the currency from capital flight, the authorities on Thursday asked several domestic funds to postpone issuing new outbound investment products, sources told Reuters. Premier Li Keqiang also phoned International Monetary Fund (IMF) chief Christine Lagarde to pledge Beijing would keep the yuan "basically stable" and improve communication with financial markets on the currency. "The Chinese government has no intention to promote exports through currency depreciation, nor it will launch a trade war," Li told Lagarde in the call, according to remarks published on a central government website. Likewise, speculation that Hong Kong might be forced to give up its peg to the U.S. dollar has waned in recent days. Ratings agency Moody's on Friday said it believed Hong Kong's large fiscal and foreign-exchange reserves would allow policy makers to handle any pressure on the peg.
