China’s yuan has fallen to a record low against the US dollar in offshore trading, with the currency now tumbling 12% so far this year.
On Wednesday, the "offshore yuan," which is traded in areas beyond mainland China, fell to 7.2386 against the dollar. This is the lowest mark since the PRC eased the rules on trading the currency in Hong Kong in 2010.
While the US Fed has worked diligently to deflate inflation by raising interest rates, Chinese authorities have prioritized fighting recession by trying to cut rates aggressively. The PRC needs to mimic American monetary policies if they want to have any hope of stopping the devaluation of the yuan and bringing back currency stability.
China's approach to this issue shouldn't be simply following the US and European blueprint for navigating financial turbulence. Stabilizing foreign exchange should be the highest priority for the Chinese government. There's too much rampant speculation in the currency market - the PRC rightly needs to protect its COVID-weary economy from unscrupulous gamblers.