Weak yuan, Trump tariff threats confound Beijing’s economic puzzle

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BEIJING: High US prices under President Donald Trump can accelerate the value of China’s currency, which has complicated the recent efforts to recover in its struggling economy.

Just a few days after starting his second term in the White House last week, Trump said he would impose 10 % on all Chinese products from February 1, while the door will be left open for negotiations.

If it is implemented, duties will potentially increase the weakness of the yuan, just as Chinese leaders work to advance an economy that faces challenges that slow down the property sector There are a long crisis of domestic consumption and debt.

Economists say the yuan may have to fall to the bottom against the US dollar this year as Beijing eliminated its fixed exchange rate two decades ago.

“Loming tariffs, lozer monetary policy and rate reduction in the United States will weaken the yuan,” said Harry Murphy Cruz, a moody analyst economist.

An outdated currency increases the competitiveness of exporters by reducing the prices of their goods and services abroad. This may encourage Beijing to allow the yuan to support its foreign trade and further reduce the defense pressure at home, noted by the Eliasia Garcia Herrio of the Notice.

‘Catch 22’

Murphy Cruz said, but a weak yuan “could” increase trade tensions with the United States, and hinder negotiations to withdraw revenue “, Murphy Cruz said.

He added that a “high -speed drop” in its price could trigger a massive capital emissions, which occurred in 2015, as uncertain about China’s economy increased.

Above all, a major depression will ensure “strong currency” than President Xi Jinping’s strategic purpose and will make China a “financial power”.

But a strong yuan will need to sacrifice China’s currency in trade.

“This is the situation of catch 22,” Garcia Harrrow wrote. ” Macori group analysts noted that for now, Beijing’s strategy is to give priority to the stability of the yuan, which eventually makes it a global reserve currency currency.

Murphy Cruz noted that the exchange rate could slip up to $ 7.45 per yuan by the end of 2025.

He said, although China’s central bank cannot stop the yuan’s defect, it will potentially interfere with foreign exchange markets to ensure that deprivation is gradual. “

For economic research, Taiwan -based Chung Hua’s Wang Goo Chen told AFP, leaving behind a symbolic sign of $ 7.5 yuan can cause “panic”, and even faster spiral Giving birth, Wang Goo China, a Taiwan -based Chung HUA company, told AFP for economic research.

He said authorities could initially plan to reduce the slightest value in response to US prices, but said, “They will eventually withdraw”.

‘Hard balance’

The People’s Bank of China (PBOC) will recently expected huge help to the yuan, which will include the issuance of six -month central bank bills in Hong Kong, which overall There is a record 60 billion yuan.

The PBOC recently injected tens of billions of dollars in financial circuits to stabilize markets and prevent activity during the lunar New Year. But such measures can be contradictory to other Beijing’s economy to promote another economy that is struggling to regain. Wang said, “This is a very difficult balance: If domestic liquidity is increased, there will be a lack of currency.”

He told AFP that the PBOC has so far been an alternative between liquidity injection and withdrawal.

Beijing has promised to provide major economic support for the domestic economy in 2025, promising to promote financial stimulation and encourage consumption through measures such as subsidies of household goods.

But the view of the rise in trade tensions with the United States keeps darkening the horizon. Society Geneal’s macro -strategic Kyung Saving warned that “domestic consumption feelings between trade disputes are unlikely to improve meaningful.”