China’s Central Bank has issued directives to prevent a significant decline in the yuan and has advised major state-owned banks to reduce their purchases of US dollars. This move follows intense downward pressure on the yuan due to increased tariffs on Chinese exports to the US.
President Donald Trump recently announced “reciprocal” tariffs on global trading partners, raising tariffs on Chinese goods to 104% after China did not comply with his demands. In response, China matched these tariffs, prompting further escalation from Trump.
The People’s Bank of China (PBOC) has instructed state banks to refrain from buying U.S. dollars for their own accounts. Additionally, these banks have been asked to scrutinise dollar purchase orders for clients more carefully, aiming to curb speculative trading.
China’s large state banks have actively sold dollars and bought yuan to stabilise the yuan’s value in the domestic market. Despite the economic challenges posed by tariffs, China’s central bank has committed to avoiding sharp yuan devaluation to maintain market confidence, though minor adjustments could support export competitiveness.
The PBOC’s focus remains on ensuring stability in financial markets amid the ongoing trade tensions with the US.
