Despite the fact that the Chinese regulator is keeping the yuan’s exchange rate stable, most analysts forecast its further weakening. The Chinese government has managed to stabilize the economic situation within the country, but the offshore yuan is at a discount to the onshore counterpart. At the same time, experts say that there is a slight improvement, including a moderate recovery in the Chinese stock market. The main indices finally entered the positive territory and a number of marginal positions is constantly rising.
Intervention of the People’s Bank of China is supposed to be the key factor in problem solving. The regulator poured 120 billion yuan worth of seven-day reverse repo into the country’s financial system. Moreover, banks had to repay 50 billion yuan on these transactions. PBOC Chief Economist Ma Jun said that the yuan’s devaluation should ensure that the situation will not take place in the future. He also added that there are no reasons for such concerns as devaluation cannot lead to a full-scale currency war.
