China’s yuan: will the central bank defend the falling currency as its new Communist Party chief takes the helm?

People’s Bank of China (PBOC) promises ‘comprehensive measures’ to prevent wild swings in exchange rate as currency approaches key psychological threshold

Newly appointed PBOC party boss Pan Gongsheng is known for talking up yuan’s ‘safe haven’ role during his time as head of the foreign exchange regulator

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The Chinese currency is at a seven-month low against the US dollar. Photo: Reuters

Published: 6:00am, 3 Jul 2023Updated: 1:09pm, 3 Jul 2023

The market is waiting to see whether China’s monetary authorities will take action to defend the yuan as the Chinese currency hits a seven-month low against the US dollar and approaches a key psychological threshold.

Speculation about a possible intervention surged as the People’s Bank of China (PBOC) warned against big swings in the yuan exchange rate earlier this week, and Pan Gongsheng, chief of the State Administration of Foreign Exchange, was appointed as Communist Party chief of the central bank on Saturday.

The fast depreciation of the yuan, partly driven by the country’s weak post-Covid recovery, is one of the biggest challenges ahead for 59-year-old Pan, who has over two decades of financial industry experience and a track record of steering the foreign exchange regulator since 2016.

“We’ll take comprehensive measures to stabilise expectations and firmly prevent the big rise and fall of the exchange rate,” the PBOC said in a summary of its quarterly monetary policy meeting released on Friday.

Pan also attended the policy meeting, which took place on Wednesday.