China signals shift to stronger yuan exchange rate policy to help develop domestic demand, analysts say
- Chinese leaders are seemingly shifting toward a stronger yuan exchange rate policy to develop the domestic consumption market under its new dual circulation plan
- Trading at around 6.83, the yuan stands at its strongest level against the US dollar in a year
China’s preference for a relatively weak exchange rate to help exporters and stimulate economic growth might soon be coming to an end, according to a growing number of analysts.
The yuan exchange rate has experienced significant depreciation in the past five years, with the central bank allowing its value to fall around 10 per cent against the US dollar since major currency reforms were introduced in August 2015 and as the economy gradually slowed.
But Chinese leaders are seemingly shifting towards a stronger exchange rate policy to develop the domestic consumption market in the coming years, while the export sector will likely play a secondary role amid escalating US-China tensions, analysts said.
Trading at around 6.83, the yuan stands at its strongest level against the US dollar in a year. A lower yuan exchange rate figure means it takes fewer yuan to purchase one US dollar, indicating a stronger Chinese currency.
The five-year devaluation process of the yuan has ended. In the future, the yuan will enter a longer process of appreciation
“I think the five-year devaluation process of the yuan has ended,” said Gao Shanwen, chief economist at Essence Securities. “In the future, the yuan will enter a longer process of appreciation. Maybe it will start soon.”