XTrade Europe Forex News: The State of the Chinese Yuan
Traders and investors are slowly taking a second glance at the steadily declining Chinese currency, the Renminbi. Though this news is currently overshadowed by news from Anglo-Saxon countries with more media coverage, news such as BREXIT, the Rio Olympics, and the US Presidential election, top financial experts from XTrade Europe says that investors are making a big mistake if they ignore this decline.
For one thing, Beijing has the second largest economy in the world, and investors should not only focus on the US dollar or the Sterling Pound to guide their financial decisions. The fall of the Yuan started with its devaluation in August 2015, and then followed by a very big drop in January 2016. The Renminbi’s devaluation in August caused howls of protest from global investors, causing the MSCI World Index to lose 10%, an equivalent of $1.6 trillion loss for companies around the globe.
China is actually using the devalued Yuan to help itself recover from government debts from private and public sectors. Beijing has allowed their debts to balloon out of control. This means that the Chinese economy is leveraged to a great extent, and experts at XTrade Europe believe that this poses a threat to global economy than any other political issue in Europe. China is of course devaluing their currency in order to boost economic growth.
The steadily depreciating Renminbi has no significant impact so far on global financial markets, but many experts, including those from XTrade Europe says that the reason behind this is because investors and traders haven’t been paying enough attention.
XTrade Europe Discusses Global Implications of Weakening Renminbi
A weakening Yuan means that many investors may pull out their capitals from Beijing. However, China so far has masked capital flight from their markets by cleverly concealing them through creative ways. China also employs very tight capital control guidelines, so it adds to the prevention of capital flight.
According to XTrade Europe, the depreciation of the Yuan will continue until the end of 2016. As financial markets are reacting based on global events and political forces, it may put cross-border investment sentiment and affect the volume of trade on China and its East Asia neighbors, particularly Japan and South Korea. The financial market should not become comfortable with how China is slowly devaluating the Yuan.
Goldman Sachs reported than billions of dollars have found their way surreptitiously to Hong Kong, and have steadily been growing since October 2015. If investors keep ignoring this, another policy may be announced by China real soon in order to soften their burgeoning debt. This policy may come as a surprise and may affect global financial markets in a negative way.
Strangely enough, Republican presidential candidate Donald Trump can see through what China is trying to do. In this case, he says that “China is the greatest currency manipulator in the world.” He further says that current US politicians don’t seem to know that China is cheating on them with unfair tariff rates and taxes. He says that it is time for the US to realize that they have tremendous economic power over China.