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- China grapples with yuan messaging as inflation pressures grow
China grapples with yuan messaging as inflation pressures grow
Bloomberg reports that China’s central bank has sought to clarify that it won’t let the yuan strengthen too much, too quickly, as mixed signals from officials underline the challenges presented by a currency trading near a three-year high.
The exchange rate will remain “basically stable,” the deputy governor of the People’s Bank of China said. Earlier, another central bank official wrote that the yuan should appreciate to offset the higher costs of commodity imports. That essay, published in a state-backed magazine on Friday, has since been deleted. Separately, another official said China has to give up its control over the exchange rate eventually to achieve greater global use of the yuan.
With factory-gate prices surging, a stronger yuan helps reduce the cost of imports, such as commodities -- a key component of inflation. Yet any sign that Beijing is encouraging gains in the currency may spur traders to bet on further appreciation, triggering capital inflows that could inflate asset bubbles.
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