HONG KONG — China’s economy has come roaring back from the depths of the coronavirus pandemic, and its currency has joined the ride.
The currency, known variously as the yuan or the renminbi, has surged in strength in recent months against the American dollar and other major currencies. Through Monday, the U.S. dollar was worth 6.47 renminbi, compared with 7.16 renminbi in late May and close to its strongest level in two and half years.
Many currencies tend to jump around in value even more, but Beijing has long kept a leash on China’s, so the renminbi’s leap looks like a power move.
The stronger renminbi has implications for companies that make stuff in China, which is a pretty big group. It could make Chinese-made goods more expensive for the world’s consumers, though the effect seems muted so far.
The most immediate impact might be in Washington, where President-elect Joseph R. Biden Jr. is set to move into the White House next week. During past administrations, a weakening of China’s currency led to anger in Washington. The renminbi’s rise may not ease the tense relationship between the two countries, but it could remove one potential issue from Mr. Biden’s plate.
Why Is the Renminbi Strengthening?
The reason is simple: China is a rare bright spot in an otherwise ravaged global economy.
The coronavirus has been tamed within China’s borders, at least for now. The nation’s factories are charging ahead full steam. The world’s shoppers — many of them stuck at home or unable to buy plane or cruise ship tickets — are buying all the Chinese-made computers, televisions, selfie ring lights, swivel chairs, gardening tools and other accouterment of nesting that they can. China’s share of world exports rose to a record 14.3 percent in September, according to data compiled by Jefferies & Company.
Investors are also keen to stash their money in China, or at least in investments tied to the renminbi. With the economy stronger, China’s central bank has room to leave interest rates higher than in Europe and the United States, where central bankers are keeping rates historically low to shore up growth.
The renminbi looks particularly strong against the dollar right now because the U.S. currency has weakened. Investors are betting that the world economy will recover this year, so many are beginning to shift their money out of dollar-denominated safe havens, like U.S. Treasury bonds, and into riskier bets.
All of that has sent money flooding into China, which tends to bolster a country’s currency.
What Is Beijing Doing About It?
Not much, at least for now.
The Chinese government has long kept a firm hand on the value of its currency, in part by limiting how much of it can move past the country’s borders. With those tools, China’s leaders for years kept the renminbi weak against the dollar, even when the Chinese currency should have been strengthening. A weak renminbi helps China’s…
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