Abacus | No, China is not weaponising the yuan in its trade war with the US
A policy of deliberate depreciation on Beijing’s part would risk a feedback loop of capital outflows and runaway currency weakness which would have grave repercussions – both within China and abroad
As if tit-for-tat trade tariffs weren’t bad enough, last week saw fears mount that Beijing has opened a new front in the economic conflict between the United States and China, and that the two sides are now engaged in a currency war. If China’s leaders really are weaponising the yuan, they are following a high-risk strategy, both for their own country and for the rest of Asia.
The fear among many observers is that Beijing is deliberately pushing the yuan down to enhance China’s trade competitiveness and offset the economic cost of the new US tariffs.
That’s what some in the US administration believe is happening. “China, the European Union and others have been manipulating their currencies and interest rates lower,” stormed the US president on Twitter.
Asked about the yuan’s fall, US Treasury Secretary Steven Mnuchin appeared to agree. “The weakening of the currency creates an unfair advantage for them,” he said. “We’re going to very carefully review whether they have manipulated the currency.”