Advertisement
US-China economic talks put spotlight on yuan exchange rate as currency continues to surge
- The yuan hit a three-year high against the US dollar and a five-year high against a trade-weighted basket of currencies this week
- The strength of the yuan is likely to renew attention on how China manages its exchange rate amid US negotiations, analysts say
Reading Time:3 minutes
Why you can trust SCMP
46
The rapid appreciation of the yuan against the US dollar recently is likely to draw increased scrutiny from the Biden administration of China’s opaque exchange rate mechanism, as high-level trade talks resume between the world’s two biggest economies, analysts say.
Advertisement
China’s top trade negotiator Liu He held a virtual meeting with US Treasury Secretary Janet Yellen on Wednesday morning, just days after he had a conversation with US Trade Representative Katherine Tai that represented the first bilateral trade talks under the presidency of Joe Biden.
China promised to refrain from manipulating the yuan’s exchange rate for competitive advantage as part of the phase one trade deal signed with the US last year.
But Washington is concerned Chinese state-owned banks might be acting as proxies for the People’s Bank of China (PBOC) to intervene in the market, said ANZ Bank’s head of Asia research Khoon Goh.
A US Treasury report on exchange rates published at the end of last year highlighted that China provides limited transparency on key features of its exchange rate mechanism, including the relationship between the PBOC, the foreign exchange activities of state-owned banks, and the central bank’s activities in the yuan market outside China.
Advertisement
Advertisement