Wednesday, November 16, 2016

Yuan’s Slide May Have More to Do With Economics Than Donald Trump

China’s currency is being hit by worrying asset bubbles and a continued reliance on stimulus

ENLARGE
BEIJING—Donald Trump has accused China of driving down the yuan, but Beijing’ recent moves to let its currency weaken faster than expected appear to have more to do with the country’s worrying property bubble as well as the dollar’s broad strength than with sending a message to the U.S. president-elect.
Behind the yuan’s rapid depreciation lately lurks a bigger concern among Chinese policy makers and economists over the country’s own economic situation, according to officials and analysts: Regardless of who is in the White House, the government may have to accept a much weaker yuan because of worrying asset bubbles—especially in China’s property market—and continued reliance on stimulus to prop up growth.
That heightens the risk of a yuan feedback loop that likely would be driven less by outside forces, the people say: The recent rapid run-up in property prices in many cities, for instance, is sending more Chinese looking to foreign markets to park their money, potentially exacerbating capital outflows that drive down the yuan further.
“For the foreseeable future, asset bubbles and uncertainty over China’s growth likely will be the main factor playing into renminbi’s depreciation expectations,” said an economic adviser to the Chinese leadership, using another name for the yuan.

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