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China's Economy Shattered, Yuan Smashed

China's Economy Shattered, Yuan Smashed

The Chinese Yuan Renminbi was hit by the United States (US) Dollar. The dollar exchange rate continued to strengthen against the yuan renminbi even to the level of 1 dollar which is equal to 7.2 yuan.

This is the lowest level of exchange rate for the Chinese currency since 2008. The yuan has continued to weaken its exchange rate, the Bamboo country's currency has weakened by 1.9% this week.

The People's Bank of China (PBOC) has also warned the public not to bet on profits from the movement of the yuan, especially after its rapid decline against the US dollar this week.

"Don't bet on a unilateral appreciation or depreciation of the Renminbi exchange rate," the central bank said in a China statement on its website.

The statement is known to have come from reading a speech by PBOC Deputy Governor Liu Guoqiang at a video conference meeting on foreign exchange that day.\

The PBOC also gave a message for banks to strive to maintain stability in the foreign exchange market. The statement from the PBOC is believed to be able to slow the pace of the weakening of the Chinese Yuan.

China's central bank is also reported to have made other steps to support the yuan exchange rate this month, including reducing the amount of foreign currency it needs to hold.

Previously, the PBOC had eased interest rates to revive economic growth devastated by the Covid-19 lockdown. On the other hand, the US central bank, the Federal Reserve raised its benchmark interest rate in order to control inflation.

Head of International and Sustainable Economics at the Commonwealth Bank of Australia, Joseph Capurso, believes that the difference in policy steps between the two countries is not entirely wrong.

"The decline in the value of the currency can actually help exporters in China, as it will make their goods cheaper and thus increase demand," Capurso said .

Capurso further explained that exports only have a 20% impact on the Chinese economy, so a weak yuan will not reverse the weakness in domestic fundamentals, which is largely due to Beijing's zero-Covid strategy and the property crisis.

On the other hand, a weakening currency condition can also cause investors to withdraw their money from the country, leading to uncertainty in financial markets.

China's Economy Shattered, Yuan Smashed

China's Economic Condition China

's economy itself is not doing well. Of note , based on a report from CNN in the second quarter of this year China's economy grew 0.4%.

According to data from China's National Bureau of Statistics, this figure is lower than the previous quarter's 4.8% growth.

The slowdown in China's economic growth was caused by the government's policy of implementing a lockdown to prevent the spread of COVID-19 in the region. Not only that, there is also a crisis in the property sector which makes the economy even more depressed.

In the first semester of 2022, China's economy grew 2.5%. This makes the overall 5.5% target for 2022 difficult to achieve.

The lockdowns carried out in various regions have disrupted supply chains because many people are unable to carry out their normal activities. Shopping centers and factories are closed.

This policy is called disrupting investor confidence. Because the Chinese government is considered inconsistent in implementing policies so that business operations and investor sentiment are still overshadowed by uncertainty .

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