Qian Wang, Vanguard
Chief economist, Asia Pacific
China’s currency hit its weakest level of 2019 against the US dollar last week, near a 7.0 level that has become symbolic in the context of US-China trade. Vanguard believes the yuan will continue to experience downward pressure, or modest depreciation, in the near term.
But we expect that the People’s Bank of China (PBoC), China’s central bank, will protect the yuan against any substantial exchange rate movements.
The PBoC is aiming to balance the risks of a modest depreciation, which can increase the competitiveness of Chinese exports and offset the effect of tariffs, with further sharp depreciation that could trigger large-scale capital outflows.