The Chinese currency has been very strong compared to the dollar over the past three years, which has created a problem for Beijing as it seeks to strengthen demand for exports and higher prices.
The sea-based renminbi gained 0.2% to reach Rmb6.4052 on the greenback on Tuesday, its highest point since June 2018. Meanwhile, the CSI 300 state of Shanghai- and Shenzhen was selected as the best day since July, rising 3.2 percent.
Renminbi has gained more than 10 percent over the past few years, encouraged by China’s economic explosion from the coronavirus epidemic and the foreign capital that has flown into the country.
Rising inflation is a major problem for policymakers in China as they struggle with rising commodity prices, the risk of corruption and the signs that growth is likely to be a steamer. Adequate quarterly and quarterly grown only 0.6% in the first three months, below expectations.
“People [People’s Bank of China] knows the dangers of appreciating renminbi given to China [slowing] growth in the first quarter, “said Ken Cheung, chief executive officer at Asia FX at Mizuho Bank. He added that the increase in capital could boost inflation and” stop “the efforts of the central bank.
In recent days, the PBoC has sent a message mixed with local currency. In a letter released Friday later, one of its officials said the central bank should allow the renminbi to go up to cut down the high prices.
Liu Guoqiang, deputy secretary general of the PBoC, echoed this sentiment, saying he hoped the exchange rate would be “stable” and driven by availability and demand, as well as the global market, according to comments posted on the bank’s website on Sunday.
Beijing has been concerned about rising commodity prices, which in April encouraged China’s inflation rate to rise sharply over the next three years, raising hopes of rising consumer prices.
The CSI 300 jump on Tuesday, which was led by significant gains in purchases and stocks, raised the figure to a record high since March.
The comments on the renminbi also followed a new government crackdown on the economy, which led to a major instability in their trade last week.
After making history in early May, metal poles Monday after Beijing warned of “extremist views” and that it could crush the economy itself. The state council, led by Prime Minister Li Keqiang, said last week that measures should be taken to prevent product prices from exceeding consumer prices.
China’s strong monetary policy may force domestic manufacturers to buy raw materials, but it will hurt exports. GDP growth returned to pre-epidemic epidemics in the fourth quarter, fueled by strong manufacturing and exports, though domestic consumption has made many people more prosperous.
Policy makers have been increasingly aware of the dangers of economic bubbles after resting on high borrowing rates last year. Guo Shuqing, the country’s chief banking officer, earlier this year warned of the dangers of the bubble in global markets is the economic sector in China.
The interest rate has not been increased but the symptoms have started slowly Debt consolidation in the country.