China’s population lag, not a weaker yuan, set to be key as it battles younger Asian peers for investment

China’s central bank set the fixing of the yuan firmer against the US dollar on Thursday after the onshore rate hit a two-year low of 6.9 on Monday

Yuan’s depreciation this year is mild compared to other currencies in the Asia-Pacific, but China’s population decline could become more of a factor in the future

Reading Time:3 minutes

China’s population grew by just 480,000 to 1.4126 billion last year, down from an increase of 2.04 million in 2020. Photo: AFP

Published: 12:00am, 2 Sep 2022Updated: 12:52am, 2 Sep 2022

The volatility of the yuan may affect China’s competitiveness with its Asian neighbours over the short term, but it is demographic factors that will be key in the long run as its younger regional peers have attracted more overseas merger and acquisition investment, economists said.

The onshore yuan closed at 6.8997 against the US dollar on Thursday, slightly weakening from the previous close of 6.8887, after the yuan hit a two-year low of 6.9 on Monday.

A hawkish address by US Federal Reserve chairman Jerome Powell last week on its aggressive plans to further raise interest rates to fight inflation has disturbed the global markets, leading to further weakening of the major currencies.

The yuan’s depreciation this year, though, is mild compared to other currencies in the Asia-Pacific, including the Japanese yen, South Korean won and the Thai baht.

As weaker currencies in Asia will improve export competitiveness, “an appropriate devaluation of the yuan within a controllable range is good for the overall exports”, said Wang Tao, head of Asia economic research and the chief China economist at UBS, on Wednesday.

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x