Yuan became cheaper than dollar, is China’s economy weakening?

Yuan became cheaper than dollar, is China’s economy weakening?


US Finance Minister Janet Yellen mentioned China’s ‘unfair economic activities’ before her Chinese visit. He said he was troubled by the punitive actions taken by China against American companies in recent months.

Let us tell you that recently China had said that it will reduce the export of two important things used in the manufacture of computer chips. At the same time, America had banned some advanced types of chips from being exported to China. US Secretary of State Antony Blicken also visited China last month.

Looking at these recent developments, it seems that the enmity between China and America has increased in the field of business. Due to this, signs of increasing trouble in China’s economy have started to appear. America also has its own problems. But China is more worried because its economy is slowing down.

In June, the People’s Bank of China cut interest rates twice. According to the news published in the Indian Express, economists and analysts say that China’s GDP will decrease in the coming times. Analysts cut China’s growth outlook to 5% from 6%.

What the report of China’s National Bureau of Statistics says

Youth unemployment in urban areas: This metric looks at unemployment among people aged 16-24. According to this, unemployment among youth in the age group of 16 to 24 is 3-4 times the level, and is increasing rapidly. It was almost 21% in May, which means that 1 in 5 Chinese youth are looking for work and have not found it yet. 

Increased industrial production: At the beginning of the year, China’s growth pace was expected to pick up. It was also necessary for global development in Asian countries. However, this did not happen.

Growth rate of investment in fixed assets: Higher investment in fixed assets shows that companies are expecting growth in future. This is also an indication that people in China are withdrawing from the business sector. Businesses are retreating fast. Investment in fixed assets increased by 4% in May this year. 

Retail sales growth: Chinese policymakers are trying to transform their economy into one that runs more on domestic consumers, but data shows that China’s consumer growth in May faltered in May. 

Export growth rate: Export growth has been considered a traditional engine for China’s economy, but the data shows that exports have also decreased on many scales. Data shows that the recovery in March and April could not be sustained in May. 

Growth rate of imports: Growing economies with strong domestic demand tend to import more. Data from China shows that imports have also contracted on several occasions, indicating weak domestic demand.

Purchasing Managers Index (PMI) in the manufacturing sector: A PMI above 50% indicates that the manufacturing economy is expanding.  Indicates shrinkage less than 50%. It is going negative in China.

According to the Indian Express, most analysts in this regard believe that the country’s economy needs a fiscal stimulus. In other words, the government will either have to spend more or cut taxes to encourage economic activity. But China continues to repeatedly tamper with the interest rates of taxes. 

According to Xinhua news agency, Minister Li  In this connection on Thursday, Kyang Organized a seminar on the economic situation. They said that "Targeted and coordinated policy measures should be introduced and implemented in a timely manner to stabilize growth, ensure employment and avoid any threat".

Yuan continues to slide lower against the dollar

Let us tell you that the yuan has fallen to its lowest level in several months. The dollar is getting stronger against the yuan. According to the news published in Reuters, analysts are predicting further weakening of China’s economy. 

Yuan, also known as Renminbi, its value in May  7.0234 per dollar reached. This has happened before in Kovid 19 also, but China was expecting improvement in the value of Yuan after Corona but the results are troubling to China.

According to news published in Reuters, foreign money has left Chinese markets, due to which the Chinese currency has fallen 4% against the dollar since the end of January.

According to the news published in Reuters, analysts of Nomura and Societe Generale say that the yuan will soon fall at a rate of 7.3. Keyong Siong, Societe Generale’s chief Asia macro strategist, says that there has been an ups and downs in broad monetary policy between China and the US. Because of this China’s economy weakened and Yuan is getting weaker.

3 reasons why China’s economy is weak

China’s property market: Real estate in China has been deeply affected after Corona. This has severely affected the economy, real estate is a major contributor to the property and other industry in China, accounting for up to a third of China’s gross domestic product (GDP).

Climate change: Climate change is causing frequent weather changes, which has a permanent impact on China’s industries. In August 2022, a severe earthquake struck the southwestern province of Sichuan and the city of Chongqing in the central region. Drought conditions had arisen after the heatwave. 

As the demand for air conditioning increased, it also affected the electricity grid in a region.  

Factories, including major manufacturers such as iPhone maker Foxconn and Tesla, had to cut power off-hours. This also led to closure of factories. 

China’s Bureau of Statistics said in August 2022 that profits in the iron and steel industry alone were down by 80% in the first seven months of 2022 compared to the same period last year. 

Lack of investors in tech giants: A regulatory action was taken on several tech giants in China. In this, Tencent and Alibaba recently recorded a decline in revenue. Tencent’s profit fell 50%. While Alibaba’s total income halved. 

Because of this thousands of young workers have lost their  lost work Due to this, the crisis of jobs in China has increased. One in five people aged 16 to 24 are unemployed. This could harm China’s productivity and growth in the long run. Its effect is already visible.

On the other hand, America is also constantly cracking down on Chinese companies listed in the American stock market.

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