“The falling of the renminbi is not a kind of policy response to the trade war, but it will really affect the result of the trade war. I think this is largely because of the appreciation of the U.S. dollar. Because U.S. government is changing its monetary policy to attract more U.S. dollars back to the United States. So it will cause depreciation of other currencies, so it does not only happen to renminbi.”
Tu Xinquan, director, China Institute for WTO Studies, University of International Business and Economics
The Chinese currency has grown weaker amid tariff and monetary policies of the United States, said two experts on Thursday.
China’s foreign trade maintained steady growth in the first seven months of this year despite escalating trade tensions with the United States.
Exports rose five percent year on year in the January-July period while imports grew 12.9 percent, resulting in a trade surplus of 1.06 trillion yuan, which narrowed by 30.6 percent, according to the General Administration of Customs.
However, a weaker RMB marked its worst four-month fall on record between April and July.
At the program Point with Liu Xin on China Global Television Network (CGTN), Dan Steinbock, founder of the Difference Group and a global economic and policy analyst, said that there were three or four forces behind the fall.
“One is the concern in China about the bond defaults. Another was a lack of liquidity, particularly two or three months ago. And thirdly, there is uncertainty about the fate of trade, of course, in the longer run,” he said.
But the expert said he saw some stabilization citing active measures from China’s central bank.
“But I would argue that what we’ve seen is some stabilization. First of all, the [People’s] Bank of China has been relatively active. It has injected more liquidity in. It has also made it more expensive to short China’s economy. The bond defaults to some degree they will happen, more of them, but I’m not quite sure that the market has been entirely accurate in its anticipation. I think that the reaction might have be a little bit exaggerated. And naturally there will be uncertainty with this kind of a trade situation, so I think that the Chinese central bank has been able to halt the fall of the yuan for now. But we are more likely to see some depreciation over time, especially the longer this trade conflict will continue,” Steinbock said.
Also at the program, Tu Xinquan, the director of China Institute for WTO Studies of the University of International Business and Economics, said that the U.S. government’s changing monetary policy is causing the depreciation of other currencies including the Chinese yuan.
“The falling of the renminbi is not a kind of policy response to the trade war, but it will really affect the result of the trade war. I think this is largely because of the appreciation of the U.S. dollar. Because U.S. government is changing its monetary policy to attract more U.S. dollars back to the United States. So it will cause depreciation of other currencies, so it does not only happen to renminbi,” explained Tu.