Said the rapid rise of the RMB against the US dollar may have overshot, signalling excess short-term speculation.

Speaking with Xinhua (info via Reuters)

Comments are from Sheng Songcheng, former director of the surveys and statistics department at the PBOC. Bolding is mine:

  • "We will prevent short-term money flooding from pushing up the yuan and diminishing the competitiveness of export firms"
  • "The appreciation of the yuan will squeeze margins at export firms, in particular the medium- and small-sized ones"
  • Sheng also said rapid rise in the rate will distract firms from their main business as they turn to speculative activities!

Sheng's warnings come with the background:

  • On Friday the PBOC set the reference rate (midpoint) for onshore yuan at its strongest (for the yuan) since May of 2018
  • larger state-owned banks were reported as selling yuan against the USD last week, which would have the impact of slowing the yuan's rise

Separately over the weekend, the PBOC-sponsored Financial News outlet warned on factors that could lead to a fall of the yuan against the USD, including:

  • policy changes by the Fed
  • strong revival of the US economy
  • control of the COVID-19 pandemic
  • a bursting of U. asset bubbles
Said the rapid rise of the RMB against the US dollar may have overshot, signalling excess short-term speculation.