Trade Outlook for China Becomes Complex Due to "Sharp Decline in Yuan Value"

As of the 13th, the USD to CNY exchange rate rose intraday to 6.81 yuan

[Image source=Yonhap News]

[Asia Economy Intern Reporter Kim Nayeon] The value of the Chinese yuan has plummeted, complicating China's trade outlook, according to Hong Kong's South China Morning Post (SCMP) on the 14th.

On the same day, Liu Kaiming (劉開明), director of the Shenzhen Party School Social Observation Research Institute, told the South China Morning Post (SCMP), "All industry stakeholders are very tense and passive," adding, "A weak yuan is always good for exports but not for raw material imports."

SCMP pointed out, "With orders from European and American markets declining, manufacturers have to pay more to purchase overseas raw materials," and "The yuan's weakness is leading to capital outflows amid the chaos and economic downturn caused by China's strict COVID-19 controls and aggressive US interest rate hikes."

Textile export consultant Liu Mingguang said, "Since April, the yuan-to-dollar exchange rate has risen from 6.3 yuan to over 6.7 yuan, and transportation costs have fallen, so many companies are making profits after settling foreign exchange," adding, "Due to weakened consumption in European and American markets, the outlook for our export industry for the rest of this year is not very optimistic."

As of the 13th, the yuan-to-dollar exchange rate rose intraday to 6.81 yuan, marking the highest level in 19 months.

Due to the impact of US interest rate hikes strengthening the dollar in global financial markets, Hong Kong authorities intervened in the foreign exchange market for three consecutive days from the 12th to the 14th to defend the Hong Kong dollar's value. This marks the first intervention by Hong Kong authorities in the foreign exchange market in 18 months since October 2020.

SCMP reported that unlike Hong Kong, Chinese authorities are refraining from strong measures in the foreign exchange market, leading to forecasts that the yuan will weaken further.

Global investment bank ING analyzed in a report on the 12th that the attitude of Chinese authorities "can only be seen as a policy adjustment by Chinese authorities seeking economic stimulus."

However, as the yuan's value sharply declined, the People's Bank of China announced last month that it would lower the foreign currency reserve requirement ratio from 9% to 8%, a 1 percentage point cut, effective from the 15th of this month.

Mr. Gao Zhendong, who operates a trade-related investment company, said, "The psychological barrier for the yuan exchange rate that everyone thinks of is 7 yuan per dollar," and added, "I believe Chinese authorities will control the exchange rate within this range."

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