Yu Miaojie: A Long View on CNY
Calling China a ‘currency manipulator’ blatantly goes against the facts as well as the US’ own criteria, argues Prof. Yu Miaojie in his opinion piece for a Chinese magazine.
The US has made at least four such attempts since early 2018, intentionally oblivious to the fact that the Chinese currency had appreciated by 47% from early 2005 to June 2019. Recent fluctuations of the yuan are due to supply and demand in the currency market under the broader backdrop of international economic and trade relations, especially the US-China ones.
Worried by the trade frictions, some investors have offloaded large quantity of yuan, setting off a depreciative course of the currency. Instead of resorting to competitive depreciation, the PBOC remains hopeful on stabilizing the value of yuan to avert negative impacts for neighboring countries and to ensure the execution of the Belt and Road initiative.
In the long term, the robustness and resilience of the Chinese economy will drive appreciation of the yuan against the dollar. A strong, stable yuan and a stable yuan-dollar exchange rate are conducive for lowering uncertainties and reducing frictions.
Chinese enterprises should endeavor to maintain market shares in developed countries while expanding business in developing countries, especially newly industrialized ones. Russia is a bright spot as its trade with China jumped by 24% in 2018. Meanwhile, companies are well-advised to cut costs and boost competitiveness.