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China’s Weakening Yuan Is Good for Everyone

Mount Equity Group Tokyo Japan > News > Markets > China’s Weakening Yuan Is Good for Everyone

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China’s economy needs all the help it can get. Draconian efforts to contain Covid-19 are eroding growth prospects and weakening the yuan. Good thing Beijing never ceded full control of its currency to markets. 

A weak yuan is a fine problem to have these days. It can add stimulus to the economy by making exports, the real standout in the past year, look more attractive. But officials don’t want things to go too far. The currency has lost more than 3% against the dollar this month, at one point notching its biggest loss since 2015. Beijing is wary of financial instability and capital flight, and has taken steps to cushion the slide.

Late Monday, the central bank cut the amount of money banks must set aside for foreign-exchange holdings. The intent is to boost supply of dollars and, accordingly, spur demand for the yuan relative to the buck. Authorities have previously deployed tweaks like…

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