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The yuan has plunged more than 100% against the dollar in the past two weeks, leaving Chinese consumers with little hope of keeping their savings in the country.
The government’s goal of slowing inflation and creating demand is now at odds with the country’s own economic growth, and the currency is falling faster than the world’s largest economy.
In its latest policy paper, the People’s Bank of China (PBOC) urged Chinese investors to buy yuan at their local exchange to protect their savings, even though China’s central bank said last week it will not intervene in the market.
The PBOC is currently considering raising interest rates to stimulate the yuan’s weak economy, which has shrunk by more than 10% in 2017.
It is the most important step China’s government has taken to keep the yuan stable since the global financial crisis in 2008.
The PBOC has been trying to get its economy back on track by loosening monetary policy and boosting its economy by encouraging foreign investment.
But this is not enough.
The yuan is still too volatile to be considered a reliable asset, says Patrick J. Brown, a professor at the London School of Economics and the author of “China’s Great Wall of Deceit: The Bank of International Settlements, the Bank of England, and their Collapse.”
“If you want to keep your yuan safe, you need to keep buying it from other countries, including the United States and Canada,” Brown says.
“So this policy paper is a clear signal to the Chinese authorities that they need to take more risks.”
The yuan’s fall has been compounded by the global slowdown, which China’s foreign exchange reserves have fallen by more that $2 trillion since mid-June.
It’s also slowed the country from its historic leap forward in manufacturing and other exports.
The Chinese government has been pushing for the yuan to weaken and to encourage domestic demand, and it’s now trying to make that happen by pushing more imports from China.
On Monday, the central bank announced that it would raise interest rates, but only to help the yuan.
But it also said it would keep borrowing from international institutions such as the IMF, the World Bank and the International Monetary Fund.
The government has already increased its foreign-exchange reserves by about $1.4 trillion.
Brown says China is also trying to boost the yuan by boosting exports, which he says is a more difficult feat.
But the central banker’s announcement does little to calm investor nerves.
“The only way they’re going to do that is to take a bigger risk and buy Chinese currency,” Brown said.
“But that’s not going to help.”
While the PBOC and the central banks actions could lead to a higher yuan value, they are not likely to stop the country being hit by a currency war.
China’s yuan is already more than 80% devalued against the U.S. dollar, and that could continue.
And with the U:S.
trading war over, many of China’s other neighbors are feeling the same pain.
In a Reuters interview on Tuesday, the IMF’s China director, Guo Heng, said the IMF is “very worried about what’s happening with the Chinese yuan, its exchange rate and its foreign exchange reserve position.”
He added, “We’re in a very delicate position, with an inflationary shock in China, a currency crisis in other Asian countries, a fiscal crisis in the U., a currency conflict in Europe.”
China is the world and world’s biggest economy, but its growth has slowed sharply.
The country’s government is struggling to manage the rapid economic growth it’s experiencing as the country tries to cope with the effects of climate change and other environmental problems.
