An employee of a bank in Huaian, Jiangsu Province in eastern China, counts dollars. Image of the file: IC
China did not write off the yuan to deal with external disruptions such as the continuing trade dispute between China and the US, because depreciation of the currency would be damaging to the economy in the long run. the country's financial markets
yuan moved lower in April, the value has so far fallen about 6 percent. The recent weakness in the yuan has spurred speculation in Western media that China depreciates the currency to compensate for the impact of the escalating trade war on its economy.
Liu Dongliang, a senior analyst at the China Merchants Bank, told the Global Times on Sunday that the strong depreciation of the yuan was mainly caused by a strong US dollar and short-term pressure on the Chinese economy, not by government manipulation .
Foreign exchange reserves in China rose by 0.19 percent month on month to $ 3,11779 trillion from the end of the year. At the end of July, the data of the People Bank of China (PBC), the central bank of the country, showed on 7 August.
The increase in foreign exchange reserves may indicate that the authorities are not actively acting on foreign exchange markets to further prevent yuan weakness. This complements the view that the yuan's decline is driven by market forces, said Lukman Otunuga, a research analyst at FXTM, a forex broker in Cyprus, in a letter to the Global Times.
"China always keeps a market-oriented reform of the exchange rate of the yuan and let the market play a decisive role, China does not use a competitive devaluation of the yuan and also does not fall in currency to deal with trade disputes" , said the PBC on August 10 in the second quarter of China. Monetary policy report
The depreciation of the yuan has a negative impact on the Chinese economy and financial markets in the long term, according to Cong Yi, a professor of economics at the Tianjin University of Finance and Economics.
"Weakness in the yuan is likely to stimulate the price increases of bulk imports and thus influence domestic commodity prices. The depreciation expectations may also stimulate capital flight from China, which damages China's foreign exchange reserves and the attractiveness of some investment," he said. Global Times on Sunday.
"Investors should not worry about the depreciation of the yuan There is not much room for the yuan to drop because the authorities continue to carry out market-oriented reforms," Cong said, adding that China In contrast to Turkey's absolute financial opening, it has retained more autonomy and intervention instruments
that some intervention is essential, in particular capital controls and the prevention of capital flight, under the current circumstances.
The PBC announced on August 6 that it would impose a reserve requirement of 20 percent on trade in forward exchange contracts. stabilize the yuan by making it more expensive to shorten the currency.
Meanwhile, the Shanghai branch of the PBC issued a notice Thursday prohibiting commercial banks from using interbank accounts for depositing or lending yuan through free trade. Accounting units, the Shanghai Securities News reported on Saturday, in which the insiders of the industry were named.
The movement will make the yuan more expensive.
The yuan has shown signs of appreciation, with its central parity rate against the US dollar up 52 basis points to 6.8894 on Friday.
Despite the sharp fall in the exchange rate of the yuan at sea, its use has remained stable worldwide.
In June, the yuan remained in the number 5 position in the currency list for global payments with a share of 1.81 percent, data from the global network of financial institutions SWIFT showed in July.
Newspaper head: China did not seek weaker yuan amid trade dispute