(Bloomberg) — The governor of China’s central bank has indicated that a stable yuan has significantly contributed to the steadiness of global financial markets and economies, in stark contrast to the US dollar, which has seen a surge following Donald Trump’s tariffs.
Trending News from Bloomberg
During a keynote address at a conference in AlUla, Saudi Arabia, on Sunday, People’s Bank of China (PBOC) Governor Pan Gongsheng remarked that while many currencies have weakened against the dollar recently, the yuan has largely remained steady.
“A stable yuan is crucial for maintaining global economic and financial stability,” Pan expressed at the event organized by the International Monetary Fund and the Saudi Finance Ministry. “In instances of excessive exchange rate fluctuations, we will implement macro-prudential policies to ensure the renminbi remains stable at a suitable and balanced level.”
China aims to present the yuan as a competitor to the US dollar, as part of President Xi Jinping’s ambitions to elevate China as a financial powerhouse with a stable currency poised to increase its influence in global trade. In recent months, the PBOC has prioritized bolstering the yuan against depreciation pressures, even postponing monetary easing after Trump enforced an additional 10% tariff on Chinese imports.
In response, Beijing has enhanced support by establishing a robust daily reference rate and adjusting capital controls, utilizing the PBOC’s macro-prudential instruments to facilitate increased borrowing from outside the country.
Over the past year, the yuan has fluctuated within a tight range of 7 to 7.3 against the dollar, despite a record widening of yield differentials between US and Chinese 10-year government bonds. This stability contrasts sharply with the PBOC’s unexpected devaluation of the yuan in 2015, which led to a 12% decline over just 16 months due to ensuing panic selling.
US Treasury Secretary Scott Bessent noted that the “strong-dollar policy remains fully in effect” under Trump’s administration. Throughout his election campaign, Trump voiced concerns regarding the dollar’s strength, citing its impact on making US exports more expensive abroad.
However, the dollar’s strength is already impacting emerging markets, such as Indonesia, and complicating efforts to reduce borrowing costs while potentially reigniting global inflationary pressures.
