The Central Bank of China, under the control of the Chinese Communist regime, devalued the yuan below the psychological level of 7 units per U.S. dollar on Monday, Aug. 5.
This is the first time that the Chinese currency has weakened below this level since 2008, during the global economic crisis, now standing at 7.02 yuan per U.S. dollar.
This drop comes just days after President Donald Trump announced on Aug. 1 that he plans to impose new 10% tariffs on Chinese goods worth $300 billion, according to Fox News.
Analysts warn that this depreciation of the Chinese currency against the U.S. dollar suggests that the Chinese regime may “be willing to use the exchange rate as a tool in the U.S.-China trade fight,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. to Bloomberg.
However, White House adviser Peter Navarro explained in an interview with journalist Chris Wallace on Fox News Sunday that, in the past, currency devaluation has been a tool of the Chinese regime to minimize the effect of tariffs on its exports.
Navarro pointed out that the Fed’s steadily rising interest rates are not helping the U.S. economy, as they strengthen the dollar against the yuan, leaving even more margin for Chinese exports.
“If the currency does stay below 7 for another day, that is a sign that Beijing has ‘weaponized’ the renminbi as a tool to improve exports during the trade war,” Andrew Collier, managing director of Hong Kong-based Orient Capital Research, told The New York Times.
However, while this artificial devaluation of the yuan may help Chinese factories defray the cost of tariffs, it may also have a negative effect on the Asian country’s economy.
“A weaker currency could prompt wealthy Chinese to shift their money out of the country, as nobody wants to hold investments in a currency that is losing value. It could dampen the spending power of Chinese consumers at a time when Beijing needs them to keep buying to bolster economic growth,” explains The New York Times.
Meanwhile, according to White House adviser Peter Navarro, the United States will continue to impose tariffs on the Chinese regime as long as it does not correct what he called Beijing’s seven deadly sins:
“Stop stealing our intellectual property, stop forcing technology transfers, stop hacking our computers, stop dumping into our markets and putting our companies out of business, stop state-owned enterprises from heavy subsidies, stop the [importation of] fentanyl, [and] stop the currency manipulation,” he said.