The Chinese yuan is trading below the central bank’s official set rate after Donald Trump’s victory
Beijing: The Asia Times reported on Monday that the Chinese yuan has been trading below the central bank’s official fixing rate since Donald Trump won the US presidential election. This indicates that the market expects the currency to weaken as the US administration gets ready to adopt a more assertive stance and potentially start new trade wars.
Although this would seem like a logical assumption, the article claims that President Xi Jinping and Governor Gongsheng of the People’s Bank of China have good reason to keep the RMB from depreciating significantly.
Preserving investor trust is the essential priority. Global investors may be put off by a sharp decline in the value of the yuan, which would indicate further serious issues in China’s economy, which is already dealing with a serious real estate crisis, escalating deflation, and massive capital flight.
But the true question is whether Donald Trump’s expected trade policies would force China to reevaluate its currency management strategy, which might lead to a purposeful depreciation of the yuan, according to the Asia Times.
According to a CNN article earlier, Trump’s reelection is anticipated to bring strong trade measures, such as tariffs of up to 60% on Chinese imports, which might affect China’s economic development and disrupt global supply chains.
The already precarious relationship between the superpowers may become much more strained as a result of new technological limitations and Trump’s anticipated tough attitude toward Beijing.
However, Beijing may also benefit from Trump’s transactional foreign policy and protectionist trade policies, which might put China under a lot of pressure. According to CNN, Beijing sees an opportunity to create a new global order less dependent on the US and to fill the void left by an “America First” strategy as Trump’s actions jeopardize US relationships and global leadership.
China will undoubtedly face more chances and hazards as a result of Trump’s return to power, according to Shanghai-based foreign policy specialist Shen Dingli. “Whether it eventually leads to more risks or more opportunities depends on how the two sides interact with each other.”
China has responded in an officially impartial manner. Chinese President Xi Jinping congratulated Trump on Thursday, while the Foreign Ministry stated in a statement on Wednesday that it “respected” the results of the U.S. election. Trump has often complimented Xi, referring to him as “a very good friend,” even though US-China ties significantly deteriorated during his first term.
