In a report on the Chinese economy last year, it cited as an example that, after the devaluation of the renminbi (official name of the yuan) from June to August 2018, the Chinese currency remained “generally stable” against the major international currencies.
The document was released the same week that the yuan for the first time since 2008 broke the psychological barrier of the seven units per US dollar, with some experts finding that the Chinese central bank deliberately allowed this devaluation in response to the announcement. United States President Donald Trump of 10% new customs duties on $ 300 billion from Chinese imports as of September 1.
The yuan's loss in value led the US Treasury Department to officially designate China as a “currency manipulator,” something Trump had insisted on for years. And while the IMF report refers to July 31, the conclusions are that the effective real exchange rate follows the ground rules.
However, the document stressed that China should be more transparent in explaining yuan movements and allowing greater exchange rate flexibility.
The Chinese People's Bank currently sets a daily reference rate for quotation in domestic markets. The yuan is not fully convertible, and the value of an international currency package can vary up to 2% per day.
The reference rate for international investors in foreign markets such as Hong Kong is not regulated by the Chinese central bank.
Earlier in the week, the world's financial markets suffered heavy losses after Beijing allowed the yuan to fall to its 11-year low against the dollar, but the Chinese People's Bank has assured companies that it will not allow further sharp declines. that the exchange rate will remain stable.
The Chinese institution justified Monday's depreciation of the yuan as “unilateral measures and trade protectionism” and “imposition of increased customs duties against China”, in a clear reference to the latest episode of the trade war that began between Beijing and Washington last summer.
A weaker yuan means that Chinese products are cheaper, which may help contain the negative effect of the new rates on the competitiveness of the Chinese economy.
With regard to the US-Beijing trade war triggered by Trump in March 2018, the IMF recalled the “great uncertainty” of short-term economic concerns and advised China to suspend additional, mainly fiscal, benefits if the situation arose. aggravate.