China expats should not rest easy when accumulating Yuan (RMB)
A number of expats seem satisfied with cash sitting in timed deposit or short-term bank wealth management products achieving 4% p.a.
However achieving approximately 1% over inflation is not the only consideration – potential currency erosion is a much greater threat.
Recently Chinese officials set the daily fixing of the yuan at a much stronger level than expected, suggesting efforts to stem declines amid escalating trade tensions with the U.S.
The People’s Bank of China’s reference rate was 6.4586 per dollar on Wednesday 20th June, stronger than the most optimistic estimate in a Bloomberg survey of 23 analysts and traders. The onshore currency gained 0.17 percent as of 10:08 a.m., after a two-day slump that was the steepest since the 2015 devaluation.
Investors are keeping a close eye on the daily fixing for clues on whether officials will use China’s currency as a weapon to combat U.S. President Donald Trump’s tariff threats
“The PBOC is trying to tell the market that the yuan will not weaken further and it is not going to devalue the currency to fight the trade war,” said Banny Lam, head of research at CEB International Investment Corp.
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