China’s economic recovery is bolstering yuan strength, and will continue to do so
- China remains the bright spot amid global gloom, with other major economies struggling not only to contain Covid-19 but also revive jobs through stimulus
- Investor confidence in Chinese assets provides solid ground for the renminbi’s outperformance
Some might argue that Beijing won’t wish to see the yuan continue to appreciate too much further, but how far will Chinese policymakers wish to be seen pushing back against renminbi strength in the coming months?
In the United States, whether justified or not, assertions that yuan weakness can be laid at Beijing’s door always resonate across the US political divide. With a new US presidential term beginning in January, Beijing might feel that, in the coming months, it would be impolitic to lean too much against renminbi appreciation.
Already, with evidence of economic recovery in China that is less apparent elsewhere, international investors recognise that the yields currently attainable from yuan-denominated Chinese government bonds are attractive in comparison to the returns on offer in government bond markets in other major economies.