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The Chinese economy is wobbling, and it’s not for lack of warnings. There was a time when Donald Trump, as president, considered “twisting China’s arm” with colossal tariffs. Today, on the brink of his second term, the picture is bleak for the Middle Kingdom: currency plummeting, lethargic growth, and a stock market that is swaying. At the heart of this storm, the yuan reaches a critical threshold, exacerbating uncertainties.
The challenges of the yuan against Trump’s ambitions
China is wobbling and the Chinese yuan, also known as renminbi, is on its knees. On Wednesday, it plummeted to 7.34 RMB for one dollar, a level not seen in 16 months. This plunge reflects concerns related to the economic policy announced by Donald Trump, namely tariffs of up to 200% on Chinese goods.
This situation is sending chills down the spines of Chinese exporters, already facing an anemic domestic demand.
The People’s Bank of China (PBoC), while stoic in its regulatory role, seems short of options. The yuan, locked within a 2% fluctuation band, dangerously flirts with its lower limit. A misstep could trigger a massive capital flight.
A few key points to remember:
- The yuan lost 0.1% in one day, a sign of increased nervousness;
- The Chinese stock market stumbles: the CSI 300 falls by 0.3%, while Hong Kong plunges by 1.1%;
- Investors fear a trade war reignited by Trump, already a fan of protectionist policy.
Despite this, Beijing remains unyielding. The PBoC has maintained its reference rate at 7.1887 RMB against the dollar, a symbolic gesture to calm the markets. But for how long?
China bets on gold to stabilize its economy
In the face of this chaos, China seems to have found a way out: gold. The country has massively increased its gold reserves in December, adding 330,000 ounces in one go. This shift towards precious metal is an attempt to diversify its holdings, as the US dollar gains strength due to good economic figures from the United States.
However, this gold strategy is far from risk-free. The price of gold, although high ($2,650 per ounce), remains subject to market whims. Some analysts, such as those from Goldman Sachs, predict a soaring rise to $3,000 by 2026, fueled by geopolitical tensions and demand from central banks.
The economic woes of China are not limited to the yuan and gold. The real estate crisis, deflation, and alarming youth unemployment weigh heavily on the country. On the horizon, threats of new US sanctions, notably massive tariffs on Chinese goods, risk worsening the situation.
For many experts, the worst is yet to come: a Chinese invasion of Taiwan seems almost inevitable. Tensions and provocations are rising, supporting this hypothesis. The only unknown remains when and how Xi Jinping will take action.
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La révolution blockchain et crypto est en marche ! Et le jour où les impacts se feront ressentir sur l’économie la plus vulnérable de ce Monde, contre toute espérance, je dirai que j’y étais pour quelque chose
DISCLAIMER
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
