Bank of Korea: "Chinese Economy Showing Rapid Recovery... Yuan to Remain Strong for the Time Being"

On the 13th, Bank of Korea's 'Overseas Economic Focus' Release
Impact of Increased Current Account Surplus Size

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The yuan is expected to maintain a strong trend for the time being, reflecting the stable recovery of the Chinese economy. This is because the rapid recovery of the Chinese economy has maintained a high interest rate level, significantly expanding demand for yuan-denominated assets.

On the 13th, the Bank of Korea stated in its 'Overseas Economic Focus' report, "Considering the sustained interest rate gap between the US and China and the stable recovery of the Chinese economy, the yuan's strong trend is expected to continue for the time being."

First, it analyzed that demand for yuan-denominated assets has greatly expanded as China maintains higher interest rates compared to major countries. As of the end of November, the yield on 10-year Chinese government bonds denominated in yuan was around 3.25%, significantly exceeding the 0.84% yield of US government bonds of the same maturity.

It also explained that the larger-than-expected increase in the current account surplus due to strong exports had an impact.

The Bank of Korea explained, "While the US's low interest rate policy is prolonged, China's large current account surplus is also likely to continue."

Meanwhile, regarding the recent increase in defaults among Chinese state-owned enterprises, it stated, "The recent default incidents centered on state-owned enterprises are under the control of the Chinese government, and the possibility of systemic contagion is considered low."

This content was produced with the assistance of AI translation services.