This piece is in yahoo news and appears to be a re-post from the South China Morning Post, a Hong Kong-based, English language newspaper. It discusses upcoming moves by the Chinese government to slow down the rising valuation of the yuan against the USD.
This of course has trade implications given that the price of goods from China will rise over time as the yuan value increases. This is one of the issues that the Trump administration has focused on with regard to charges of currency manipulation.
‘Beijing will make it easier for traders, multinational companies and outbound investors to use the yuan in international transactions, after the Chinese currency rallied to a 30-month high against the US dollar….The new rules, which take effect February 4, will cut red tape in yuan trade settlements, simplify paperwork and streamline the ability of Chinese citizens to move money out of the country, according to a circular jointly released by the People‘s Bank of China and five other government agencies on Monday….When foreign companies invest in China or make payments for domestic mergers and acquisitions, the funds can be transferred directly, rather than via a special bank account, according to the new rules. Beijing will also set up a pilot programme to facilitate foreign fund remittances and cross-border yuan settlements for approved contractors.’
Given the ongoing various business lockdowns in certain U.S. states and the additional trillions in ‘stimulus’ money ready to be ‘printed’, increasing U.S. debt to the highest non-war levels in history, the USD is likely to continue slipping in value. Based on the article, it seems that China may be one of the few countries that retained some level of economic growth during 2020.
‘The relaxations were announced as the Chinese currency continued to strengthen, backed by a strong economic recovery and weakness in the US dollar. The yuan appreciated 6.3 per cent in 2020, with an 8.5 per cent rise over the second half of the year alone….The agencies may hope that loosening restrictions to allow Chinese investors to buy more foreign currency through selling yuan, thereby putting downward pressure on the currency before it becomes overvalued. An expensive yuan would make Chinese goods more expensive to buy for overseas customers, potentially hampering China’s bumper export receipts.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
