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China’s currency is set for its worst month against the dollar in more than a year and a half, as investors fret that a clampdown on borrowing could slow the country’s swift economic recovery from Covid-19. The tightly regulated onshore-traded renminbi fell 1.4 per cent against the greenback in March to about Rmb6.57, marking its worst one-month drop since August 2019, when Washington labelled Beijing a currency manipulator. The recent drop also erased the Chinese currency’s gains against the dollar since the new year. The fall represented a partial reversal for China’s currency after a banner 2020, when demand for the renminbi drove gains of 6.7 per cent. Offshore investors, eager to capitalise on the country’s rapid economic rebound from the coronavirus pandemic, poured more than Rmb1tn into China’s bond and stock markets. It also reflected the fact that Beijing faces a dilemma regarding whether to withdraw stimulus now that the world’s second-biggest economy has recaptured its pre-pandemic growth rate, just as the recovery elsewhere in the world begins to pick up steam. Economists said that China’s vague recently announced GDP growth target of “over 6 per cent” for 2021 was weighing on the currency. That is because it may signal authorities could be willing to clamp down on financial risk so forcefully that growth for the year could come in well below the 8.5 per cent forecast by economists polled by Bloomberg. Comments are closed.
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March 2021
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