Issue Brief on “Stability of Yuan Amid China-US Trade Tensions”

The Chinese Yuan has depreciated in recent months and its rate is expected to go beyond 7 Yuan per dollar – a key psychological level – for the first time since the financial crisis of 2008. The trade war that was initiated by Donald Trump a few months after taking over the presidency is piling pressure on the China’s managed currency as Yuan was valued at 6.3 against the US dollar at the beginning of 2018.[1]

There are other reasons for the depreciation of Chinese currency. The US economy has grown in the last few quarters and investors are once again showing confidence in the world’s largest economy. On the other hand, the growth rate of Chinese economy has been slowing down. As reported by China’s National Bureau of Statistics, the Chinese economy grew by 6.5 % from a year earlier in the third quarter of 2018. This is the slowest growth rate since the first quarter of 2009.[2]

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