China yuan: Beijing sets out policies to stem fast appreciation to support exporters amid economic headwinds

Beijing also called on banks to sign more long-term foreign exchange settlement agreements with trade firms

Moves by the central government on yuan come hot on the heels of Beijing’s warning about the “threefold pressure” on the economy

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A clerk counts renminbi banknotes at a bank outlet in Hai’an city in eastern China’s Jiangsu province, Monday, Dec. 6, 2021. Photo: AP

Published: 2:00am, 24 Dec 2021Updated: 9:25am, 24 Dec 2021

China has pledged to keep the yuan exchange rate “basically stable” amid a recent appreciation, as it assembles a set of policies to counter the risks of slowing exports and rising economic headwinds next year.

Beijing also called on banks to sign more long-term foreign exchange settlement agreements with trade firms in a targeted manner, to empower the latter in offsetting exchange rate risks, according to the notes from a Thursday meeting of the State Council, the country’s cabinet, chaired by Premier Li Keqiang.

The guidance is just the latest example of stepped-up efforts by Chinese policymakers to curb the yuan’s strong gains against the US dollar, which have eaten into the profits of the country’s exporters.

The call by the central government also comes hot on the heels of Beijing’s warning about the “threefold pressure” on the economy, including shrinking demand, supply shocks and “weaker expectations”.

The uncertainties, instability and imbalance facing trade at present are increasing

State Council

“The uncertainties, instability and imbalance facing trade at present are increasing,” the central government warned in Thursday’s meeting.

The onshore yuan closed at 6.3702 against the US dollar on Thursday, 19 basis points, or 0.03 per cent, stronger than the previous day, and hitting a week high.

The State Council said that the country will open up wider to the outside world and strive to help trading companies, especially smaller firms, secure orders and stabilise their outlook expectations.