In the year since China’s surprise devaluation of its currency, the yuan’s troubles going global have become all too apparent.
With the yuan continuing to lose strength as the Chinese economy slows, Chinese authorities have become reluctant to further expose the currency to market forces — a step necessary to achieve true reserve currency status.
This guidance would not be put in writing, but banks were expected to comply, the officials said, according to people familiar with what transpired at the meeting. Banks were also instructed not to sell foreign currency to companies not registered in Shanghai.
In its 2016 report on internationalizing the yuan, released Wednesday, the PBOC hails rising cross-border transactions and the currency’s progress toward global status. The Chinese leadership, under President Xi Jinping, has set a goal of having “a convertible, freely usable currency” by 2020.
But in a seeming contradiction to this aim, the central bank early this year introduced nationwide restrictions meant to block capital outflows, and has since tightened them. The yuan has been hit with bursts of activity that appear the work of short-sellers. Clearly afraid of letting the currency weaken or allowing capital outflows, the PBOC has put a halt to the liberalization on which the drive for a global yuan depends.