China is allowing a stronger Yuan

Written by Victoria Mingyang Ni

Many argued that China’s Yuan is deliberately undervalued by the government to compete with the lucrative export pricing. It’s been labelled by the West as ‘currency manipulator’ for more than a decade. Beijing is allowing the Yuan to appreciate recently as it seeks to cheapen the imports and bolster weak consumer spending. 

China’s social consumption has dropped 9.9% y-o-y; RMB debt has surged to 992.7 billion based on the latest statistics in July. Both import and export marked a decline largely due to the pandemic. At the same time, Yuan gained nearly 5% since late May versus the dollar to its highest level in more than a year. 

DBS Bank Ltd. and Mizuho Bank Ltd.  both agreed that a stronger Yuan is ideal for Beijing at a time when Chinese President Xi Jinping is pushing for a more self-reliant economy. Wang Ju, director and senior foreign-exchange strategist at HSBC  said that “A stronger Yuan would help China diversify away from the dollar and optimize its resource allocation."

However, this move sparked worries from officials that a strong Yuan would undercut the nation’s exports to the world.

Click below for Further Reading!

China Allows for Stronger Yuan as Xi Turns Focus to Home

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