Today, we will tell you about Yuan Key. China Says Stable Yuan Key to World Economy Hit by Strong Dollar. Let’s get started:
(Bloomberg) -The central bank’s governor of China said that the steady yuan has been a factor in the stability of economies and markets across the globe, which is in stark contrast to an inflated dollar in the aftermath of Trump’s tariffs.
China Says Stable Yuan Key to World Economy Hit by Strong Dollar
Although many currencies have appreciated lately against the dollar however, the yuan is mostly solid, People’s Bank of China Governor Pan Gongsheng noted in a keynote address at an event at AlUla, Saudi Arabia, on Sunday.
“A stable yuan has played a key role in maintaining global financial and economic stability,” Pan stated at the event organized by the International Monetary Fund and the Saudi Finance Ministry. “We will adopt macro-prudential policies in times of exchange rate overshooting to keep the renminbi exchange rate stable at an adaptive and equilibrium level.”
China is marketing the yuan as a competitor in the face of the US dollar, as an extension of the efforts of President Xi Jinping to build China as a global financial power, with a currency secure enough to play a growing role in international trade. The PBOC has lately prioritized defending the yuan from the pressure to lower its value and has delayed monetary easing after Trump imposed a further 10 percent tariff on Chinese items.
Beijing has responded. Beijing was to boost support by setting a high daily reference rate and changing capital controls by making use of one of the macro-prudential tools that allow for the borrowing of more money from abroad.
The yuan fluctuated in an extremely narrow range between 7 and 7.3 against the dollar over the past year, and even that gap between US as well as Chinese 10-year bond yields has widened to a record. This stability is in stark contrast to the PBOC’s sudden devaluation of the yuan in 2015, whose subsequent panicked selling made the currency down 12% within 16 months.
The message coming from Washington states the message from Washington is that “the strong-dollar policy is completely intact” under Trump, According to US Treasury Secretary Scott Bessent. During the period, Trump voiced his concern over the currency’s strength because it makes US items more expensive abroad.
However, the strength of the dollar is in the midst of emerging markets like Indonesia and is posing a challenge to plans to reduce the cost of borrowing by risking to rekindle prices around the globe.
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For China, the approach of protecting the yuan comes with risks for the country’s economy. A stronger currency can make imports more expensive at a time when consumer demand is already shaky and after deflation remained for the second year running in 2024.
China is in the process of completing the longest stretch of economic price drops from the 60s to today, according to analysts, revealing a major issue that was likely to be concealed by a growth increase towards the end of the year.
The growth in domestic prices and consumer desire “can be stronger,” Pan stated during his speech, which was an indirect acknowledgment of the pressures caused by deflation. The economy was driven primarily by investments earlier in time, but today, authorities are focusing on consumption, Pan said.
China’s consumer-friendly policies are efforts to increase the income of households by providing more subsidies for consumption and strengthening Social security, according to Pan. Pan.
The economy of the country is robust, and there are fewer risks from local government debts and the housing market, according to the governor. The world’s second-largest economy is expected to adopt a more proactive approach to fiscal policy and a more accommodative monetarist policy, he added.
The officials under the leadership of Xi are planning to increase expenditure by the government and a reduction in interest rates as household wealth is in danger due to an extended property slump. In addition, boosting consumption has been pushed to the top of the economic agenda this year, which is only the second time this has been done in the past decade.
China is a target for risk from “rising trade protectionism, geopolitical tensions and the fragmentation of the global economy,” according to Pan. Chinese authorities are determined to open the doors to the world economy, Pan stated and added that China intends to “advocate free trade” and fair competition.
“We’re now facing policy uncertainties in some economies,” said the official. “If protectionism escalates, rising trade fluctuations will hurt trade and investment, drive up inflation expectations, and undermine medium-term growth” of the world.
With the assistance of Tian Yun as well as Denise Wee.
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