China's currency contributes to gains in America's currency! This is the view of Pan Gongsheng, Governor of the People's Bank of China.
According to the PBOC representative, a stable yuan currency is key to global financial and economic stability and contrasts with the strengthening of the US dollar. Moreover, it gained ground after US President Donald Trump imposed tariffs.
Despite many currencies losing value against the dollar, the yuan has held steady. "A stable yuan has played a key role in maintaining global financial and economic stability," the PBOC chief said, adding that Chinese authorities intend to keep the yuan exchange rate at an "adaptive and equilibrium level." For several months, the Chinese currency has fluctuated in a tight range between 7 and 7.3 yuan per 1 US dollar.
As for Washington, its rhetoric is aimed at maintaining the "strong dollar policy." According to US Treasury Secretary Scott Bessent, the greenback will remain strong under Trump. However, a stronger dollar is currently putting pressure on emerging markets, complicating efforts to lower borrowing costs. Experts believe that this situation threatens to revive inflationary pressures around the world.
Meanwhile, Chinese authorities see the yuan as a rival to the dollar, in line with President Xi Jinping's plans to turn China into a financial powerhouse with a stable currency occupying key positions in global trade. In recent months, the PBOC has prioritized protecting the yuan from depreciation. Against this backdrop, the central bank has delayed loosening monetary policy, despite the United States imposing an additional 10% tariff on Chinese goods.
Beijing's response to Washington involves increasing support for the national currency by controlling its exchange rate. In addition, the Chinese government aims to adjust and regulate foreign capital flows using one of the macroprudential tools to increase foreign borrowing.
However, experts argue that the strategy of defending the national currency carries risks for the Chinese economy. A stronger yuan leads to higher import costs. The situation is further complicated by weakening consumer demand and deflation, which has persisted for the second year in a row. According to analysts, China is currently on track for its longest streak of economy-wide price declines since the 1960s.
