China’s sovereign currency, the renminbi, has weakened significantly over the past few months as it fell 8% against the dollar in the first half of 2022. 2 years. China is suffering from a major property crisis as its overstretched housing sector collapses amid a depreciating renminbi.
Chinese yuan falls to 2-year low against USD, PBOC cuts interest rates to boost liquidity
The global economy isn’t looking great these days, and cracks are starting to form in almost every country in the world.While the US dollar and Russian ruble have strengthened this week, the Chinese yuan weak against the dollar And that’s more than in two years.At the time of writing, the RMB is $6.86, or levels not recorded since August 2020. Of course, China’s central bank, the People’s Bank of China (PBOC), is looking to strengthen the renminbi and the Chinese economy.
Today, less than a week later, the PBOC Lowered The country’s benchmark bank interest rate was raised from 2.1% to 2%. In addition, the PBOC cut his one-year lending rate to 2.75% from his 2.85%. At the time, the central bank of China explained that it was a measure to “maintain reasonable and sufficient liquidity in the banking system.”China’s cabinet is also new spending policy package, aims to double infrastructure spending. The PBOC’s rate cut from 2.1% to 2% was seen as “bearish,” he said, ING economists. I have written A note to investors after the central bank cut interest rates.
On August 22nd, the PBOC lowered the prime rate on 5-year loans from 4.45% to 4.30%, thus reducing certain lending rates again. China’s central bank also revised its one-year prime rate to 3.65% from 3.70%. On the same day, Atilla Widnell, Market Analyst and Managing Director of Navigate Commodities, said: Detailed In a note to investors, the central bank’s rate cut last week didn’t get much of a positive response.
“Given that the Chinese economy requires consumers to spend money on the street, new monetary easing/stimulus measures are seen as wasteful, like ‘whipping a dead horse,'” Widnell said. was
Domino effect of Chinese property troubles, FX watchdog warns some Chinese banks against aggressive yuan selling
The causes of China’s economic problems and the depreciation of the yuan are thorny real estate problemaccording to myriad report Scattered all over the web. Zhirong Ou, a senior lecturer in economics and author of theconversation.com, describes China’s property sector as “traditionally a strong housing market”, but in recent times the sector has Suffocated by a large-scale “financial crisis”. A domino effect has seen property buyers refuse to pay mortgages and domestic construction and development loans have been overextended.
“The recent spate of mortgage strikes by homebuyers across China has exposed the market’s pent-up risk as it has developed over the past two decades,” said theconversation.com author. Zhirong Ou also notes that the strike initially started with the Evergrande debacle, but has since spread like an epidemic. When Evergrande began to crack in the seams, Robert Kiyosaki, author of the best-selling book Rich Dad Poor Dad, emphasized that Evergrande’s situation was “House of Trump.”
On the other hand, the renminbi situation is dire, with the recent depreciation of the renminbi hurting cash flow at several Chinese banks. limit the fall By fixing the onshore spot rate. Chinese megabanks and the People’s Bank of China understand that a weaker yuan will lead to market instability and a lack of confidence in China’s official currency will accelerate capital outflows.
Two days ago, Reuters reported that the country’s FX watchdog had warned various banks. “China’s foreign exchange regulator called several banks on Wednesday to warn them not to aggressively sell the yuan,” Reuters explained on Aug. 24.
What are your thoughts on the recent depreciation of the yuan? What are your thoughts on the mortgage problem facing this country right now? Let us know your thoughts on the matter in the comments section below.
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