Escalating trade dispute with U.S. will put pressure on currency: experts
A former government official has denied that the Chinese government will deliberately depreciate the yuan amid its trade dispute with the U.S.
His view has been echoed by several domestic economists, who have stressed that the central government will not manipulate the yuan's exchange rate.
Guan Tao, a former senior official at the State Administration of Foreign Exchange, said that the recent reports about China using yuan depreciation as a tool to cope with the trade spat with the U.S. are nothing but "sensationalism by speculators" with the intention to gain profits or probe for policy inclination, according to domestic finance news site cnstock.com.
A report from Bloomberg noted on Monday that China is considering the possibility of yuan depreciation to cope with the trade spat.
Citing people familiar with the matter, the report said that some domestic officials are studying a "two pronged" analysis of the yuan, with one part looking at the effects of using the currency as a tool in trade talks with the U.S., and with the other looking at the results that might be caused by such a strategy.
Guan also stressed that the People's Bank of China (PBOC), the country's central bank, has gradually withdrawn from intervention in the yuan's value since cross-border capital flow showed an inclination toward balance in 2017.
Liu Xuezhi, a senior analyst at the Bank of Communications, told the Global Times on Tuesday that the yuan's depreciation will have strong side effects like pressure on capital outflow.
"Furthermore, the impacts of exchange rate fluctuations on trade won't immediately manifest, and small-scale fluctuation will only have a very limited influence on trade," he said.
Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, said that even without government intervention, changes in status of the two countries' trade will likely cause the yuan to depreciate.
"But it should be clear that it would be a result of market practices instead of deliberate government actions," he said.