Donald Trump’s demand for stable yuan to end US-China trade war ‘acceptable’ to Beijing
- Report suggests United States wants China to keep the value of the yuan stable as part of trade negotiations between the world’s two largest economies
- Move by Washington aimed at neutralising any effort by Beijing to devalue its currency to counter American tariffs during the ongoing trade war
A demand from the United States that explicitly requires China to keep the yuan exchange rate stable as a condition to end the ongoing trade war plays right into Beijing’s hands, and is an offer the government in Beijing will accept, said analysts.
For years, the US government had been pressing China to adopt a market-oriented exchange rate system so that the yuan can find its “fair value” against the US dollar.
China officially scrapped the yuan’s “hard peg” to the dollar in 2005 and adopted a “soft peg” under a “managed floating exchange rate system”, allowing the exchange rate to fluctuate within a narrow range.
If the Trump administration changes its focus on the yuan’s exchange rate formation mechanism and specifically requests China to prevent the yuan from depreciating to a certain level, such a demand will fit immediately into what Beijing has been doing since the summer of 2015, according to analysts.
The reports that Trump has demanded a stable yuan sent China’s currency to its biggest gain against the US dollar in more than three weeks.