Tuesday, November 8, 2016

U.S. Election Linked to Yuan Decline

The U.S. election is affecting China’s currency reserves. Optimism about the U.S. election has boosted U.S. currency but partly as a result, China’s currency has fallen. The yuan is also hurt by continuing decline in manufacturing and by capital flight. Much of the capital flight is a response to the currency decline. At the same time, with global demand for manufactured goods barely holding steady, there is little incentive to invest in China’s already overbuilt manufacturing sector. China may not be able to support its currency much longer because of its declining currency reserves. Reserves fell 1.4 percent last month to their lowest level in five years.

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