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| The weakening of the yuan is supporting the Chinese economy. (Source: AFP) |
The yuan has fallen more than 5% against the dollar since hitting a high in January 2023, when global markets welcomed China's reopening.
Gary Ng, senior economist for Asia -Pacific at Natixis Bank, believes that a weaker currency could currently support exports, especially as global trade is slowing this year.
Exports have been one of the few bright spots in the Chinese economy in recent years, but new orders have fallen in recent months due to weakening global demand.
The People's Bank of China (PBoC) has a variety of policy tools to prevent excessive currency volatility.
But even though the yuan has fallen sharply over the past month, Alvin Tan, head of foreign exchange strategy in Asia at RBC Capital Markets, believes the PBoC seems to want to let the USD push the exchange rate against the yuan higher amid weakening Chinese growth.
Mr. Tan stated: "A depreciating currency is also a form of monetary easing, and predicted the exchange rate would be 7.1 yuan to 1 USD by the end of the third quarter of 2023, before closing the year at 7.05 yuan to 1 USD."
Experts believe that the Chinese yuan may not continue to depreciate sharply.
According to predictions in a recent Reuters survey, the Chinese currency will not depreciate below 7.3 yuan to 1 US dollar this year – a low recorded in 2022 when the Covid-19 pandemic rattled the world's second-largest economy.
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