China has not recently accumulated excess foreign debt and has done so as a reaction to the US Federal Reserve’s monetary easing. On the contrary, as the exchange administration itself admitted, a more open and flexible policy was decided on the yuan. In the medium to long term, the basis in the foreign exchange market for stable operations is still solid. The yuan has continued its three-week upward march against the US dollar, in nearly six weeks on Thursday, as the dollar weakened.
The scenario of relations between the US and China
Beijing, which remains the main holder of American sovereign debt, has stopped buying because it fears the effects of American monetary policy, especially the repercussions on the domestic front.
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China is still expected to post a current account surplus in the first quarter, albeit lower than in the fourth quarter of 2020.
Insiders have identified a number of risks. Not only the growing global pandemic but also geopolitical factors that will impact the Chinese and world economy.
Greater flexibility in the Chinese yuan’s exchange rate can ease market pressure and prevent expectations that it will only move one way.