Chinese currency slides again despite Beijing’s assurances

BEIJING — China’s currency weakened again Wednesday after hopes among financial traders that its decline was stabilizing helped to calm jittery global markets.

The yuan edged down to 7.0488 to the U.S. dollar, about 0.4% below its level late Tuesday. The currency strengthened slightly to 7.0443 to the dollar in the afternoon but still was below the previous day’s level.

Financial markets plummeted Monday after Beijing allowed the yuan to fall to an 11-year low against the dollar, breaking through the politically sensitive level of 7 to the U.S. currency. Washington responded by declaring officially that China improperly manipulates its exchange rate, opening the way for possible sanctions.

Wednesday afternoon, U.S. equities and benchmark Treasury-note yields mounted a comeback, reversing sharp drops as investors turned more positive on the outlook for global growth over centralbank moves to ease monetary policy.

On Tuesday, central bank officials told foreign companies “the yuan will not continue to depreciate sharply in the future,” the bank press office said in a statement. It gave no details but said “two-way fluctuation” of the currency “will become the norm in the future.”

Tension over currency adds to a sprawling U.S.

Chinese fight over Beijing’s trade surplus and technology policies that companies and investors worry will chill global growth.

The yuan’s moves over the past week are small compared with fluctuations of the euro and other major currencies. But Washington complains the yuan is too weak, making China’s export prices unfairly low and swelling its trade surplus. That makes any decline politically volatile.

The People’s Bank of China sets the yuan’s exchange rate each morning and allows it to rise or fall 2% during the day. It can intervene and buy or sell currency — order Chinese commercial banks to do so — to guide the exchange rate.

The bank lowered the opening level for trading Tuesday, but traders were encouraged when it was slightly higher than they expected. That, plus a central bank statement late Monday promising to keep the currency stable, helped to stabilize financial markets.

On Wednesday, the central bank lowered the starting point for trading again, setting it at 6.9996 to the dollar, almost 0.5% below Tuesday’s starting level. That would allow the yuan to slide to below 7.1 to the dollar while staying within the trading band.

Officials told companies that the slide will stop, “but they haven’t seen that today,” said Chris Weston of Pepperstone in a report. “This is again proving central to moves across markets in Asia.”

Stock market benchmarks in Tokyo and Shanghai closed down 0.3%. Seoul lost 0.4%.

The Chinese central bank showed it can “steer global markets” and “quickly weaken” the yuan if needed to offset U.S. tariff increases, Stephen Innes of Oanda foreign exchange company said in a report.

“This is about China proving a point,” Innes said. “They have a brawny tool at their disposal.”

President Donald Trump’s punitive tariffs on Chinese products have added to downward pressure on the yuan by prompting concern about a slowdown in the world’s second-biggest economy.

Last week, Trump stepped up their fight by threatening to raise tariffs on an additional $300 billion of Chinese goods, effective Sept. 1.

That came after the latest round of talks aimed at ending the tariff war concluded in Shanghai with no sign of a deal. Negotiators are to meet again in September in Washington.

Economists say if the Sept. 1 tariff increase goes ahead, the dent in Chinese exports and economic growth could weaken the yuan to as low as 7.2 to the dollar.

New U.S. levies were announced Tuesday on $4.4 billion in imported Chinese cabinets.

The Commerce Department said that it will ask the U.S. Customs and Border Protection agency to collect cash deposits from importers of the wooden cabinets and vanities from China based on subsidy rates of as much as 229%. The Commerce Department issued a preliminary determination in response to a petition filed earlier this year by the American Kitchen Cabinet Alliance, alleging at least $2 billion in harm from the Chinese shipments.

The petition alleged dumping margins of more than 200%. Tim Brightbill, a trade lawyer from Wiley Rein LLP in Washington representing the industry, said in March that Chinese exporters get doubledigit subsidy margins based on the number of programs supporting their domestic industry, including discounted land, electricity, raw materials, grants, discounted loans and export incentives.

“Today’s determination gives the American kitchen cabinet industry the hope it needs in our fight against China’s unfair trade practices,” Stephen Wellborn, director of product and research development at U.S. manufacturer Wellborn Cabinet and a member of the American alliance, said in an emailed statement.

The cash deposits will be collected from Henan AiDiJia Furniture Co. and Deway International Trade Co., which were found to have gotten a subsidy of 229%. The Ancientree Cabinet Co. will have to pay a subsidy rate of 11%; Dalian Meisen Woodworking Co. 16%; Rizhao Foremost Woodwork Manufacturing Co. 22%; and 16% for the other Chinese producers not selected for individual review, according to the Commerce Department statement.