China’s currency is set for its worst month against the dollar in more than a year and a half, as investors fret that a clampdown on borrowing could slow the country’s swift economic recovery from Covid-19, reported the Financial Times.
The tightly regulated onshore-traded renminbi fell 1.4% against the greenback in March to about RMB 6.57, marking its worst one-month drop since August 2019, when Washington labelled Beijing a currency manipulator. The recent drop also erased the Chinese currency’s gains against the dollar since the new year.
Economists said that China’s vague recently announced GDP growth target of “over 6%” for 2021 was weighing on the currency. That is because it may signal authorities could be willing to clamp down on financial risk so forcefully that growth for the year could come in well below the 8.5% forecast by economists polled by Bloomberg.
“China’s economy is now well above trend and, with policy stimulus being withdrawn, is on course for a cyclical slowdown that isn’t reflected in consensus expectations,” said Julian Evans-Pritchard, senior China economist at Capital Economics. “At the same time, the outlook for the rest of the world has brightened”.