Chinese Experts Say "Yuan Depreciation Will Not Persist"

Although the value of the yuan is declining due to concerns about a slowdown in the Chinese economy, local experts predict that the current weakness will not persist.

On the 26th, China's state-run Global Times (GT) reported, "Experts analyze that considering the recovery momentum of the Chinese economy, the downward pressure on the yuan will not be sustained." According to ChinaMoney.com, the offshore yuan reached 7.24 yuan per dollar at one point during the day, marking the highest level in over seven months since November last year.

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The yuan has been continuously weak since May. GT stated, "The main factors are the widening yield gap with the US, where interest rate hikes are possible, weaker-than-expected economic indicators announced by China, and increased uncertainty in global markets."

Zhou Maohua, an economist at Everbright Bank, explained to the media, "There are forecasts that the US will raise interest rates again in July, which could trigger concerns about US tightening, banking system crises, and economic recession." Zhou added, "In this situation, exchange rate fluctuations can be seen as normal market depreciation," and further noted, "The relatively high uncertainty regarding inflation, policies, and overseas economic outlook will also affect the exchange rate."

However, the current exchange rate is considered to be at a 'reasonable level.' GT evaluated, "Despite the continuous downward pressure on the yuan, the exchange rate has not deviated from a reasonable range," and added, "Market sentiment is stable, and exchange rate flexibility has greatly improved."

The issue lies in concerns about the Chinese economic slowdown. In May, China's industrial production increased by only 3.5% year-on-year, and retail sales rose by 12.7%, both falling short of expectations. Fixed asset investment decreased by 7.2% cumulatively from January to May. Economist Zhou explained, "Although some economic indicators show a moderate trend, China is still in a continuous recovery process," and added, "There is still considerable room to initiate more targeted stimulus measures."

Sing Zichang, Morgan Stanley's chief China economist, stated in a recent report, "The Chinese economy will enter a recovery trajectory in the second half of the year with new stimulus measures," and predicted, "With a rebound in the service sector, the yuan exchange rate will stabilize compared to other currencies."

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