The Chinese currency is declining rapidly as the world’s second largest economy falters under the weight of Covid restrictions, CNN reported.
Since the start of the year, investors have been moving money out of China, driven by concerns over rising lockdowns in major cities, and Beijing’s close ties with Moscow in the wake of Russia’s invasion of Ukraine. The links have raised fears that China could be targeted by Western sanctions if it helps Moscow.
The yuan – also known as the renminbi – hit its lowest level since September 2020 early on Friday in the onshore market that Beijing controls as well as the offshore, where it can trade more freely, CNN reported.
The currency recovered later in the day to stand around 6.78 per US dollar. In the past three months, the yuan has lost about 7 per cent of its value against the greenback. In April alone, it posted its biggest monthly drop on record. In the same month, China’s foreign exchange reserves fell by the most since late 2016, the report said.
Analysts say a combination of Beijing’s Covid restrictions and rate hikes by the US Federal Reserve have made investors wary about keeping their money in China. The country witnessed record outflows from Chinese bonds in February and March.
So far, at least 32 cities in the country remain under lockdown, as President Xi Jinping’s government relentlessly pursues its zero Covid policy, which has hit almost every industry and pushed the economy backwards, CNN reported.