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The exchange rate of the Chinese currency against the US dollar has reached its highest level in three years, posing a challenge to Beijing as China tries to balance its export demand with soaring commodity prices.
Onshore traded yuan rose 0.2% on Tuesday to 6.4046 yuan per dollar, the highest since June 2018. At the same time, the Shanghai and Shenzhen 300 Index of China’s Shanghai and Shenzhen 300 Index hit its best closing price since July, up 3%. Minute.
In the past year, the renminbi has appreciated by more than 10%, thanks to the Chinese economic rebound from Covid-19 Pandemic Foreign capital flows into the country.
However, for Chinese policymakers, the appreciation of the renminbi is a problem. They are struggling to cope with rising commodity prices, the risk of asset bubbles, and signs that growth may be losing momentum.Quarterly gross domestic product Only increased by 0.6% In the first three months, it was much lower than expected.
“In view of China’s exchange rate policy, the People’s Bank of China is aware of the risk of RMB appreciation. [slowing] The growth momentum was strong in the first quarter. “Zhang Jian, chief Asian foreign exchange strategist at Mizuho Bank, said. He added that capital inflows may exacerbate asset price inflation and render the central bank’s attempts to stabilize leverage “ineffective.”
In recent days, the People’s Bank of China has issued various messages about the country’s currency. On Friday, an official of the organization said in a subsequently deleted editorial that the central bank should allow the yuan to appreciate in response to rising commodity prices.
Liu Guoqiang, deputy governor of the People’s Bank of China, subsequently stated that he expected the exchange rate to be “stable” and driven by supply and demand and international market conditions.
The Chinese government has begun to pay attention to rising commodity prices. In April, rising commodity prices pushed the prices of Chinese factory gates to their highest levels in three years, thereby increasing the likelihood of consumer price inflation.
After the government’s new crackdown on the renminbi, comments on the renminbi followed, which exacerbated the extreme volatility in its transactions last week.
After the record was set in early May, Iron ore prices fell on Monday After Beijing warned of “excessive speculation” and stated that it would curb product hoarding and monopoly. The State Council of China, chaired by Premier Li Keqiang, said last week that measures should be taken to prevent producer prices from penetrating consumer prices.
The appreciation of the renminbi will lower the price at which the country’s industrial producers buy raw materials, but it usually hurts its exporters. Driven by strong industrial production and exports, the country’s GDP growth returned to the pre-pandemic rate in the fourth quarter, although domestic consumption lags behind the broader recovery.
After the relaxation of major lending rates last year, policy makers have maintained a high degree of vigilance against the risk of asset bubbles.Guo Shuqing, China’s top banking supervisor, earlier this year Warn of bubbles in the international market And China’s real estate industry.
Interest rates have not yet increased, but signs are showing The country’s credit conditions are gradually tightening.
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