After the domestic and foreign yuan rates fell below 7.25, the Central Bank of China took action to curb the depreciation of the yuan. It did recover to 7.10 on September 30. But to the world the yuan is depreciating. Yang Bin, a mainland economic scholar, said to The Epoch Times that the current Chinese economy is more pessimistic than in 2008. The over-issue of currency has led to a loss in the value of the yuan and inflation is coming.
The yuan exchange rate fluctuates wildly
On September 30, the central parity rate of the Chinese yuan against the dollar was 7.0998, up 104 pips or percentage in points from 7.102 in the previous trading day. Both the onshore yuan and the offshore one regained the 7.10 mark.
Recently, the yuan has depreciated against the dollar. On September 15, the devaluation accelerated after the exchange rate broke through the psychological barrier of 7 and broke the level of 7.2 in less than two weeks.
On September 28, the domestic yuan weakened to 7.24 per dollar, a 14-year low, while the offshore yuan slid to its lowest point since 2010.
Earlier, Reuters cited sources as saying that China’s central bank had asked major state-owned banks to be willing to sell dollars and buy the yuan in foreign markets to curb the devaluation of the yuan.
The People’s Bank of China (PBOC) issued a statement on the September 29 to stabilize the exchange rate, and the onshore and offshore yuan rose again. However, analysts say that market sentiment is still seeing the currency depreciate as the Federal Reserve (Fed) signaled to continue raising interest rates.
Expert: Issuing too much currency leads to devaluation
Yang told The Epoch Times on September 30 that the yuan should have appreciated due to less investment in production. Then why is the yuan depreciating? These unusual phenomena are the result of excessive currency issuance and a regime desperately printing money. It is like the situation after the 2008 financial tsunami, when the authorities launched 4 trillion yuan investment and over-issued currency.
Yang said that China is an economy dependent on foreign trade. It accounts for more than 60% of China’s economic growth. Since the start of the trade war in 2018, exports have been affected and along with the impact of the pandemic, the inability of local finances to meet demand, and the objective effect of the government issuing a large number of notes, all led to the devaluation of the yuan.
In the short term, the central bank has taken steps to stabilize the exchange rate, but in the long term, Yang said that related measures may not be effective. Yang added, “Responses have been futile, every economic measure in recent years has failed to produce the expected results, and all of them are incomplete, including the Belt and Road Initiative, Xiongan New Area, other economic measures are currently useless.”
The economic situation turns bad, the situation is more pessimistic than the official data
Yang described the current economic situation as ‘much more pessimistic’ than official statistics. “There were many Chinese people running out, whole families running out, there were many people queuing, foreign capital was withdrawn and the whole economy was in a state of collapse. It is no longer a matter of recession. The pessimistic figures published now are not true, in fact, they are even more pessimistic.”
Yang said that in recent years, the economy has not been as good as the year before, and the situation has gotten worse, even worse than when the financial tsunami hit in 2008. Was China’s economic situation in 2008 so dire? Are ordinary people’s jobs so harsh? No, in this case, the CCP has to spend on everything, but what if there is no money, just print money.
Next, people have to watch out for inflation, Yang said that inflation is the civilized act of government stealing, prices increase, money in people’s hands does not change, but the purchasing power is less. He said, “This is a very deceitful way of doing things and without the courage to develop the economy, printing money is the last resort to rob, this is the real situation.”
Analysis: Internal and external pressures continue yuan devaluation
Davy Jun Huang, an economist living in the United States, told The Epoch Times on September 29 that although the yuan devaluation has benefited exports, it has also benefited big developers like Evergrande. According to KWG Group Holdings, the initial liquidity crisis remains unresolved, and the devaluation of the yuan makes it more expensive to pay for bonds in US dollars. Huang said, “The long-term decline in the exchange rate, for China’s huge foreign debt, is extremely difficult.” .
Regarding the Central Bank of China stabilizing the exchange rate for two consecutive days, Huang said that they also do not want to see the yuan depreciate quickly, but because the dollar is very strong, and because of the impact of the domestic “zero-COVID” policy and the selection of parties in the Russia-Ukraine war, concerns about sanctions have led foreign investors to keep an observant attitude toward the environment of the China’s investment market. Huang said, “Factors affecting the devaluation of the yuan remain unchanged. They (the CCP) will intervene, but it may not have much effect.”