To stabilise the yuan, China’s central bank could raise interest rates. But tighter monetary policy would be at odds with the needs of its weak economy, which is hampered by a property slump and draconian covid controls
Save time by listening to our audio articles as you multitaskHe was wrong—but a version of this future can be seen in China. Each morning its central bank sets an exchange rate for the yuan known as the “fix”. China’s currency can float 2% above or below this rate each day. The zone is narrower than Mr Krugman expected and its mid-point moves each morning in discrete steps.
What is less clear is where the bottom of the staircase lies, and how sure-footed the descent will be. Some analysts fear a repeat of 2015, when a poorly executed devaluation of the yuan provoked capital outflows that further undermined the currency. But a rerun is unlikely. The yuan is no longer overvalued. Its target zone is better managed and its capital controls are better enforced.
China can also take comfort from the economic fundamentals. Despite its insulation from market forces, its exchange rate is reasonably well priced. Adjusted for inflation, it is about 10% below its fair value, according to the Institute of International Finance. It has remained stable this year against a broader basket of currencies. If only the fundamentals applied, it ought not to plummet.
Danmark Seneste Nyt, Danmark Overskrifter
Similar News:Du kan også læse nyheder, der ligner denne, som vi har indsamlet fra andre nyhedskilder.
Bank of England £65bn gilt intervention staved off UK financial ‘spiral’Policymakers defend launch of bond-buying programme
Læs mere »
Post Office scandal: 'Why am I still fighting to clear my name?''Why am I still fighting to clear my name?' Former sub-postmaster, convicted of embezzling money 16 years ago, says authorities not moving quickly enough to clear people's names
Læs mere »
Why Russia but not China faces human rights actionThe UN has examined allegations of repression and human rights violations in both countries.
Læs mere »
2022 TIME100 Next: Erriyon KnightonMichael Johnson (MJGold) on Erriyon Knighton (ErriyonK): 'The type of talent that he has is a very, very rare talent. I'd love to see him continue to succeed, and so far he’s shown that he's up for the challenge' TIME100Next
Læs mere »