The expert named the reasons for the sharp decline in the yuan

The Chinese yuan has declined sharply due to the tightening of US trade policy, Evgeny Shatov, a partner at Capital Lab, told Izvestia on April 9.

"The sharp drop in the yuan is due to the decision of US President Donald Trump to raise import duties on Chinese goods from 54% to 104%, as well as China's retaliatory measures," the expert explained.

According to him, the People's Bank of China (PBOC) artificially maintained the exchange rate of the national currency for a long time, but after the new US tariffs began to weaken it.

"This is logical: the cheap yuan helps exporters compensate for some of the losses from duties. The authorities deliberately weakened the exchange rate in order to support businesses in the face of trade wars," the analyst noted.

According to the expert, among the additional reasons is the slowdown in the Chinese economy. Capital outflow has also become another problem.: Foreign investors are reducing investments in China due to geopolitical risks, including tensions with the United States and sanctions.

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"GDP growth is declining due to the real estate crisis, weak domestic demand and the effects of covid-19 restrictions. In addition, the global economic downturn has reduced demand for Chinese exports, and US tariffs have worsened the situation," he said.

In addition, in the short term, the yuan will continue to weaken moderately, but sharp collapses will be avoided thanks to the actions of the Central Bank. The long-term recovery of the exchange rate will depend on the growth rate of the Chinese economy and the global situation.

"Stabilization is possible only if the NBK starts active currency interventions, the authorities launch incentives for the economy and improve relations with the United States and the EU. But so far, the probability of this is low," Shatov summed up.

The day before, the Chinese authorities decided to raise duties on imported goods from the United States to 84% in response. It is specified that the additional tariff rate will apply to all goods imported from the United States and will be increased to 84% from April 10.

On April 8, the US authorities increased import duties on goods from China to 104% due to China's refusal to lift retaliatory measures.

Chinese Foreign Ministry spokesman Lin Jian said on April 7 that the US abuse of duties is economic bullying, damaging not only other countries, but also Washington itself.