All this led to an influx of money into China, which tended to strengthen the country’s currency.
What is Beijing doing about it?
Not much, at least not yet.
The Chinese government has always maintained a strong hand over the value of its currency, in part by limiting how much it can cross the country’s borders. With these tools, for years China’s leaders kept the renminbi weak against the dollar, even when the Chinese currency should have strengthened. A weak renminbi helps Chinese factories keep prices low when they sell goods abroad.
For now, it appears that China’s factories do not need this kind of assistance. Even as the renminbi strengthened, China’s exports continued to emerge.
S&P Global, chief economist for Asia Pacific, said many of them are already seeking their business in dollars rather than in renminbi because the United States accounts for a large share of its customer base. This means that although the profit margins of Chinese factories may take a hit, American shoppers will not notice much of a difference in price and will continue to buy.
A strong currency has benefits for China, too. Chinese consumers can purchase imported goods more efficiently, helping Beijing nurture a new generation of shoppers. It looks good to economists and policymakers who have long pressured China to loosen its tight control over the country’s financial system.
A stronger renminbi could also help China make its currency more attractive to companies and investors who want to do business with dollars. China has long sought to Make its currency more global As a way to increase its international influence despite its desire For strict control of its use She has often overshadowed those ambitions.
“This is definitely an opportunity for China to move forward with Renminbi internationalization,” said Becky Liu, head of China’s macroeconomic strategy at Standard Chartered Bank.