Growing 'Xi Jinping Risk' in Financial Markets... Sharp Decline in Chinese Yuan Value

[Asia Economy Beijing=Special Correspondent Kim Hyunjung] Concerns over Chinese President Xi Jinping's third term and the launch of his close aides in the top leadership are pulling down the value of the yuan.

On the 25th, the Foreign Exchange Trading Center under the People's Bank of China, the central bank, announced the yuan's reference exchange rate against the dollar at 7.1668 yuan (1,405.34 won), up 0.0438 yuan from the previous trading day. The yuan's value against the dollar plunged 0.6%.

The sharp decline in the yuan appears to reflect concerns about the one-man system and concentration of power shown by the personnel related to "Xi Jinping's third term." In the offshore market, the exchange rate was recorded at 7.3432 yuan per dollar as of 9:40 a.m. (China time) on the same day.

The People's Bank of China responded to the yuan's weakness by raising the foreign currency loan adjustment index for companies and financial institutions (offshore capital macroprudential adjustment coefficient) from 1 to 1.25 on the day.

Meanwhile, the Hong Kong Hang Seng Index plunged 6.36% from the previous trading day to close at 15,180.69, marking the lowest level since early 2009. In particular, the Hong Kong H Index, composed of mainland Chinese companies listed on the Hong Kong stock market, plummeted 7.30%, showing the largest drop since the index was launched in 1994. Mainland China's Shanghai Composite Index (-2.02%) and Shenzhen Component Index (-1.76%) also closed sharply down.

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