As the value of the yuan continued to decline, Chinese authorities warned that they would crack down on yuan speculation and other disruptive activities in the foreign exchange market. This came amid state-owned Chinese banks actively selling dollars, which is interpreted as a sign of the authorities' willingness to intervene aggressively in the exchange rate.
On the 11th, the People's Bank of China (PBOC), the country's central bank, held a special meeting on nationwide self-regulation of the foreign exchange market in Beijing and announced these measures. The meeting discussed the recent situation in the foreign exchange market and issues related to the yuan exchange rate.
On the 5th (local time), the U.S. Department of the Treasury designated China as a currency manipulator. This is the first time in 25 years since the Clinton administration in 1994 that the U.S. has designated China as a currency manipulator. On the 6th, an employee at the KEB Hana Bank Counterfeit Response Center in Euljiro, Seoul, is organizing U.S. dollar and Chinese yuan bills. Photo by Moon Honam munonam@
The PBOC emphasized, "We have the capability, confidence, and conditions to maintain the fundamental stability of the yuan exchange rate," adding, "We will take measures when necessary to prevent excessive exchange rate fluctuations, firmly correct unilateral market trends, and resolutely deal with actions that disrupt market order."
Furthermore, it stressed, "Participants in the foreign exchange market should consciously maintain market stability and foster an orderly market," and "Speculation, incitement, and other acts that disrupt the order of the foreign exchange market must be resolutely eradicated." It also added, "Market participants should adhere to risk neutrality, avoid blindly following trends, refrain from betting on one side only, and maintain the safety of their assets."
On the 8th, the yuan exchange rate reached 7.351 yuan per dollar, marking the highest level in 16 years and continuing its depreciation. Regarding the exchange rate, the meeting assessed, "The yuan has depreciated against the dollar but remains relatively strong against other major currencies," and "The foreign exchange market is stable, and market outlooks are also stable."
It also highlighted that the Chinese economy is showing a stable trend. The PBOC stated, "The consumer price index (CPI) year-on-year growth rate has bottomed out, and import-export data have exceeded expectations," adding, "The effects of real estate policies are gradually appearing, and consumption is recovering."
However, some analyses suggest that the PBOC's remarks indicate a more proactive stance in defending the exchange rate. Bloomberg News, citing anonymous sources, interpreted, "The PBOC's announcement came as state-owned banks actively sold dollars," and "It signals that the PBOC will strengthen its response measures if necessary, sending a strong message about stabilizing the yuan." In fact, after the PBOC's statement, the yuan exchange rate fell to the 7.2 yuan per dollar range.
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