China’s yuan is once again making headlines as it rose 0.1% against the dollar but closed in on the 7 level. The yuan’s steep losses this week are a result of continued concerns over the country’s uneven economic recovery.
Uneven Economic Recovery
The ongoing COVID-19 pandemic has hit economies around the world hard, and China is no exception. Despite being the first country to be hit by the virus, China managed to control the spread of the virus quickly and resumed economic activities. However, the country’s economic recovery has been uneven, with some sectors performing better than others.
One of the sectors that have been lagging behind is the manufacturing sector. The manufacturing sector in China has been facing various challenges such as rising raw material costs, supply chain disruptions, and shortage of skilled workers. As a result, the sector’s growth has slowed down, which is evident in the recent industrial profit data.
Industrial Profit Data
The industrial profit data due on Thursday is expected to shed more light on the laggard manufacturing sector in China. This data will provide insights into the performance of the manufacturing sector and will help policymakers to take necessary measures to boost the sector’s growth.
China’s Yuan
The yuan’s recent losses against the dollar are a result of the concerns over the country’s uneven economic recovery. The yuan had appreciated against the dollar earlier this year, but the recent losses have erased most of the gains.
The approaching 7 level against the dollar is a significant level for the yuan. This is because the yuan had weakened beyond the 7 level in August 2019 due to the US-China trade tensions. The weakening of the yuan beyond the 7 level had caused concerns over a potential currency war between the US and China.
Conclusion
The uneven economic recovery in China is a cause of concern for the country and the world. The performance of the manufacturing sector is critical for the country’s economic growth, and the industrial profit data due on Thursday will provide insights into the sector’s performance. The yuan’s recent losses against the dollar are a reflection of the concerns over the country’s economic recovery. As the yuan approaches the 7 level, policymakers and investors will be closely watching its movements.
