Defending exchange rate China’s top priority – China’s Global Times


China’s Global Times recently came out with the news report covering latest mood at the US-China trade negotiations that has went sour off-late but hasn’t stalled.

The news report mentions that there remain three core concerns of China that must be addressed.

The first is to remove all the additional tariffs, which must be totally revoked if the two sides are to reach a deal. The second is that the amount of purchases should be realistic. The two sides reached consensus on the volume in Argentina and should not change it spontaneously. The third is to improve the balance of the wording of the text. Every country has its dignity, and the text must be balanced.

The news report also highlighted defending the yuan exchange rate as China’s top priority. It further said:

  • The biggest challenge facing China in the future comes from the exchange rate problem, and it is necessary to be prepared for the upcoming war defending the yuan exchange rate. 
  • It can even be said that no other problems are important compared with the exchange rate issue.
  • The most worrying issue is the yuan exchange rate. Once the yuan continues its depreciation against the dollar, it will trigger a series of chain reactions. Currency depreciation leads to asset price drops, which prompts capital flight overseas. Intensified capital flight will continue to weaken the yuan, which inevitably dents China’s foreign reserves. If such a vicious cycle takes shape, it will have a broad impact on China’s financial market, asset market and real economy.
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