Yuan Stability Remains Solid Amid Policy Speculation, PBOC Publication Says

The foundation for maintaining a “basically stable” yuan exchange rate remains robust, according to an article published by Financial News, the official publication of the People’s Bank of China (PBOC), on Wednesday. The report emphasized that China’s foreign exchange market is operating steadily and projected that the yuan would stabilize and strengthen as the year comes to a close.

The article attributed the yuan’s resilience to a combination of solid economic fundamentals, prudent monetary policies, and a balanced approach to foreign exchange management. “Market expectations are stable, and the overall stability of the yuan exchange rate has been effectively maintained,” the article stated.

This reassurance from the central bank’s mouthpiece comes as speculation rises about the future trajectory of the yuan. Earlier on Wednesday, a Reuters report revealed that China’s top leaders and policymakers are contemplating a potential weakening of the yuan in 2025, in anticipation of heightened U.S. trade tariffs. This policy consideration aligns with scenarios that could arise if former U.S. President Donald Trump returns to the White House and reinstates or increases trade restrictions against China.

The possible strategic adjustment reflects Beijing’s efforts to shield its economy from external shocks while maintaining competitiveness in global trade. However, analysts believe that China’s central bank will continue to prioritize a controlled approach to currency management to avoid excessive volatility and maintain investor confidence.

The yuan has faced some downward pressure in 2024 due to a stronger U.S. dollar and diverging economic growth trajectories between China and the United States. Despite these challenges, the PBOC has repeatedly intervened to support the currency, underscoring its commitment to a stable foreign exchange market.

As the year-end approaches, the central bank’s comments signal optimism about the yuan’s performance in the near term, even as policymakers weigh long-term strategies to navigate an uncertain global trade environment.