China Pushes State Banks to Buy Dollars to Curb Yuan’s Rally

China's monetary authorities are directing state-run banks to accumulate US dollars, aiming to temper the yuan's persistent appreciation. The currency has gained nearly 7% against the greenback since April 2023, squeezing export margins despite making Chinese goods more competitive abroad.

The People's Bank of China's intervention underscores a growing tension: while a stronger yuan reduces import costs, exporters like Beijing Ultrapower Software Co. report revenue declines as high as 28%. "This isn't about currency weakness," observes Yuan TAO of Orient Futures. "It's about maintaining equilibrium where export growth fuels domestic prosperity rather than subsidizing foreign buyers."

Exporters, who predominantly transact in dollars, seek stability as currency fluctuations erode profits. The PBOC's MOVE signals a preference for controlled depreciation over market-driven gains, prioritizing industrial sustainability over speculative advantages.