Investing.com — In an effort to shore up its weakening currency, China has unveiled plans to store more dollars in Hong Kong and improve capital flows. The measures, announced on Monday, include allowing companies to increase their foreign borrowing.
The yuan has struggled, hovering near a 16-month low amid a dominant dollar, falling Chinese bond yields and the looming threat of higher trade barriers as Donald Trump’s U.S. presidency begins next week.
The People’s Bank of China (PBOC) has taken steps since late last year to halt the yuan’s decline, including issuing warnings against speculative moves and taking measures to support interest rates. On Monday, authorities reiterated warnings against speculation in the yuan and raised limits on foreign borrowing by companies, a move aimed at bringing more foreign currency into the country.
Addressing the Asia Financial Forum in Hong Kong, PBOC Governor Pan Gongsheng stated that the central bank plans to significantly increase the share of Chinese foreign exchange reserves in Hong Kong. However, he did not provide further details. China’s foreign reserves stood at about $3.2 trillion at the end of December, but little is known about where these reserves are invested.
The currency has lost more than 3% against the dollar since the US elections in early November, amid concerns that Trump’s proposed new trade tariffs could put additional pressure on China’s struggling economy.
The PBOC has set its official midpoint guidance on the stronger side of market projections since mid-November, which analysts have interpreted as a sign of concern about the yuan’s decline.
The central bank has also announced other measures in recent days, including suspending government bond purchases and planning to issue large amounts of banknotes in Hong Kong. These steps are intended to prevent interest rates from falling too much and to control the circulation of yuan abroad.
This article was produced with the support of AI and reviewed by an editor. For more information see our General Terms and Conditions.
