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Macroscope | As reopening China chases foreign capital, this may be the year of the yuan
- China is open for business again and seeking foreign investment
- This means solid demand for the renminbi, even as the dollar softens with interest rate increases tapering off
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The Year of the Rabbit may also be the year of the yuan. China’s economy is reopening and investors will not wish to miss the boat. As capital flows into China in pursuit of good returns, it should buoy the value of the yuan on foreign exchanges, and in particular, versus the US dollar.
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With the government clearly pushing economic growth in China, the desire of investors not to miss out is likely to trump coronavirus fears. Investors have to be in to win and the fear of missing out can be a powerful motivator.
But leaving aside behavioural considerations, there is a persuasive narrative that can underscore arguments in favour of the yuan on the foreign exchanges – not least that China is not only open for business again, but is courting foreign investment.
This willingness to engage with overseas partners was exemplified last week in the tone of a virtual meeting between Yin Li, the newly appointed secretary of the Beijing municipal party committee, and Brian Roberts, chairman and CEO of Comcast Corporation.
“[Beijing] will unswervingly promote a higher level of opening up to the outside world and make greater efforts to attract and utilise foreign investment, which will provide more opportunities and broader space for foreign enterprises to develop in Beijing,” Yin said, adding that China’s capital city was willing to deepen cooperation with Comcast.
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Nor is this a Beijing-centric approach. Chen Jining, of the Shanghai Municipal party committee has been expressing similar sentiments, saying last month that Shanghai welcomes enterprises from all over the world to share in the city’s development opportunities.
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