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China’s yuan to continue rise against US dollar in short term, but when will Beijing say enough?
- Some economists see the yuan strengthening into 2021, but others say Beijing will step in as it could hurt the nation’s competitiveness and jeopardise its policy agenda
- The yuan has strengthened since June alongside the country’s rapid economic recovery from the damage caused by the coronavirus pandemic
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China’s yuan is expected to continue appreciating against the US dollar in the early part of next year due to strong growth of the Chinese economy and weakness in the American currency due to a coronavirus-induced slowdown in the United States, analysts said.
However, they disagree over whether the yuan will continue appreciating throughout the entire year, with some arguing Beijing will step in to stop an excessive rise that would endanger the economy and its policy priority to promote home-grown innovation.
The Chinese currency has strengthened since June alongside the country’s rapid economic recovery from the damage caused by the coronavirus pandemic and on Monday improved to 6.5361 against the US dollar, according to the China Foreign Exchange Trade System.
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Liu Ligang, chief China economist at Citigroup, made the boldest assessment, predicting the yuan would strengthen by 10 per cent to 6 per dollar, or even more, by the end of 2021.
The problem China faces next year will be huge, unrelenting capital inflow. The yuan appreciation will be a key threat to China’s macro economy
The lower the figure in the US dollar-yuan exchange rate, the stronger the Chinese currency, since it means it takes fewer yuan to purchase one dollar.
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