Commentary
China’s COVID-19 lockdowns and rate cuts are driving down the yuan and exacerbating foreign capital outflow.
“Uncertainty is really the keyword, because there’s no view, no outlook about how long this could last, and what will be next after Shanghai,” Massimo Bagnasco, vice president of the European Union Chamber of Commerce in China, told Bloomberg on May 17.
In March, Hong Kong investors sold off a record $24.2 billion worth of yuan-denominated debt. The exodus from Chinese investments is fueled by fears over China’s diminishing growth prospects, decreasing bond yield, and higher rates on U.S. investments.
At the same time that the United States and other Western nations are raising interest rates to combat inflation, China’s central bank is considering cutting rates to stimulate the economy. In April, the central bank decreased the reserve requirements from 9 percent to 8 percent in a bid to increase the money supply….