Abstract On the 21st, Beijing time, Bloomberg reported that China has successfully let its currency depreciate in recent months without triggering a loud protest from its trade rivals, which has given it a competitive advantage in a weak global economic growth environment. Thanks to the policy change, compared to the beginning of 2016...
On the 21st, Beijing time, Bloomberg reported that China has successfully let its currency depreciate in recent months without triggering a loud protest from its trade rivals, which has given it a competitive advantage in the weak global economic growth environment. Thanks to the policy change, this round of depreciation has become more stable and moderate compared to the global market turmoil caused by the sharp depreciation in early 2016. This silent state was tested at the G20 financial ministers meeting in China from July 23 to 24. In the difficult period, it was once the renminbi of Asia. It has fallen the most against the US dollar in Asian currencies so far this year.
Whether China can maintain its moderate decline without triggering a new round of capital outflows is one of the main issues on the list of risks facing global economic growth, finance ministers and central bank governors in emerging and developed countries. The meeting will be held this weekend.
It is expected that the G-20 will reaffirm that countries should not deliberately weaken their currencies just to help their economies. A US official told reporters that the US Treasury Department will reiterate the importance of avoiding the manipulation of exchange rates or the depreciation of competitive currencies, and conduct close consultations on foreign exchange market issues.
Faster fall
Du Dawei, a senior fellow at the Brookings Institution in Washington, said that although China's economic stabilization and market sentiment have eased the pressure on the renminbi, there is still a risk of more significant devaluation.
"China's financial turmoil is definitely one of the risks that the market is worried about," Du Dawei said. “The market is less worried about it than in 2015, but these risks have not disappeared.â€
Since January, the yuan has depreciated by nearly 3% against the US dollar and hit a six-year low, which is expected to fall for the third consecutive year. The renminbi against a basket of currencies depreciated by about 6% in 2016. The renminbi hit its biggest gain in two weeks on Wednesday.
On Sunday, the US announced that Finance Minister Jacob Lu and Chinese Vice Premier Wang Yang had called the RMB before the G-20 meeting, but other recent information included discussions on the RMB. Although the United States has repeatedly urged China to make the renminbi more flexible and better communicate its policies this year, the US Treasury has not criticized the recent depreciation of the renminbi.
A US Treasury official told reporters on a conference call on Monday that in the end, the flexibility of the RMB exchange rate will be whether China will allow it to appreciate when it is under pressure to appreciate.
Japanese policy
Another issue that G-20 officials are concerned about is that Japan’s policy response, the government and central bank are fighting the strongest currency in Asia this year. Finance Minister Taro Aso repeatedly warned that the soaring yen is sometimes disorderly and one-sided, suggesting that the government can intervene to suppress local currency. Within a few days after the G-20 meeting, the Bank of Japan will meet to formulate policies, and economists expect the stimulus to escalate.
When central bank governors and finance ministers meet in Chengdu, the foreign exchange market is only one of many topics; another leading issue will be how to revive global economic growth.
Although China’s economic slowdown has temporarily bottomed out and the US stock market has risen to a record high, the perception that market prosperity and fundamentals are increasingly fragmented is still lingering.
Latent danger
The uncertainty of Brexit, the potential banking crisis in Italy, the geopolitical risks from Turkey to the South China Sea, and the weakening of global economic growth are some of the new risk factors that G-?20 officials will discuss.
Original title
World's Silence on Weaker Yuan to Be Tested at G-20 Gathering
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