China is using methods that have not been used since the global economic crisis to reduce its trade deficit as the country struggles with rising commodity prices and slowing growth, with experts predicting the future.
The move by the People’s Bank of China to force lenders to use foreign currency shows that policy makers want to repay their profits as soon as they are affected. the most powerful level against the dollar three years last week. This marked a change from the years of Trump administration, which he calls Beijing treasurer in 2019 after the renminbi weakened beyond the key Rmb7 on the dollar level.
The central bank, it announced late Monday, is raising Chinese financial institutions from 5 to 7% of total foreign exchange reserves “in an effort to boost foreign exchange”, according to the PBoC.
This is indicative of such a dramatic increase, the researchers said, and for the first time since the global financial crisis. The power of the renminbi has also made headlines for Chinese policymakers who are already suffering from high prices and high levels of economic risk.
The Chinese dollar has grown by about 11% against the dollar in the last 12 months. The sea-sold renminbi did not change slightly to Rmb6.3696 on the greenback on Tuesday but experts said further action in the potential trading markets.
“The move is aimed at reducing the level of appreciation of the international community by reducing [foreign currency] the economic downturn in the system, “says Becky Liu, a Chinese technology expert at Standard Chartered, who says the rise could cost about $ 20bn in the export market.
This hinders the availability of foreign exchange, which makes it harder to use dollars to buy renminbi onshore, which could reduce the value of the Chinese currency.
“PBoC’s actions reflect his views against the prompt recognition of the renminbi and his views. [at] alternatives are coming, ”said Ken Cheung, chief of Asian financial experts at Mizuho Bank.
However, some Chinese lawmakers objected to a very powerful renminbi. An employee at PBoC this month filed a lawsuit, which was later withdrawn, stating that the central bank should allow the money to flow rising prices for global goods. China’s strong currencies could make their exports of cheap goods cheaper.
Higher commodity prices raised corporate prices in China and reduced fears. A cabinet meeting chaired by Premier Li Keqiang last month said measures should be taken to curb rising commodity prices, which rose 6.8% in April, continuing to rise in consumer prices, which remains. Electricity prices fell throughout the year 2020.
There are also indications that China’s economic recovery from Covid-19 is cool. Quarterly and quarterly, wealth grew only 0.6 per cent in the first three months of the year, according to the National Bureau of Statistics, a slight decrease in expectations.
Exports to China, which they say are benefiting from the weakening crisis, have been performing well over the past year despite financial strengthening. Exports increased by 32% annually in dollars in April, indicating that China is in control of global trade to recover quickly from the epidemic.
However, “a strong renminbi could reduce China’s competitiveness in the export sector”, added Cheung.