00:00China's central bank says the yuan exchange rate is driven by market forces, not deliberate devaluation.
00:07The People's Bank of China says the yuan has gone through several cycles of strengthening and weakening over the past
00:14two decades.
00:15It rejects claims that China weakens its currency to boost exports.
00:20China also says it will continue growing domestic demand and opening up its economy.
00:25Let's discuss this now with Shaolin Chen, head of international at Crane Shares.
00:31Shaolin, do you make anything of the timing around this discussion,
00:34bearing in mind that the EU Trade Commissioner is currently talking about Europe's trade deficit in China?
00:42Thank you for having me on your program.
00:44Clearly, the time is closely linked with the EU is visiting China now.
00:50So there could be a possibility because of this and China is making a clarity on their FX policy rather
00:59than making a new FX policy announcements altogether.
01:03I think it's offering more clarity on that.
01:06And I just want to make sure I know your audience understands that.
01:09The FX risk really decided by, you know, you're buying from me, I'm buying from you.
01:14And in this instance, China clearly has revived its exports to the whole world, not only to EU, to the
01:22whole world.
01:23If you look at July, August, September exports number from China, China clearly finding its new foot in emerging technology,
01:32frontier AI, EV, so on and so forth.
01:34Maybe some actually are going to EU that help China's exports in another way, helps with their currencies.
01:42But when coming to the other side of the trade, buying more from EU, you've got to have the product
01:48that the Chinese consumer wanted as number one.
01:51You also need to have a strong domestic consumer market in China wanting to buy more.
01:57The policy may cannot force the domestic consumer to buy more products from one or the other region.
02:04So I agree with the policy clarification today.
02:07It is not a deliberate move.
02:09It's more of a reflection of the trade on both sides.
02:13I was having a quick look at currencies across the world.
02:18The British pound, the South African rand are all seen by some estimates to be undervalued.
02:24Do you think the yuan is undervalued?
02:27And what does that really mean?
02:32Undervalued, you've got to have a fair value, and that's compared to it, to say you are undervalued.
02:37There's no definite a value that yuan should be set at.
02:42No one can say that.
02:42Not Chinese policymaker, not the market, so on and so forth.
02:46You've got to look at long term, what is driving the currency level.
02:50I came to the United Kingdom to study in the early 90s.
02:55I remember we have to give 15 renminbi to exchange for one pound.
03:00And today, when I want to pay that money back to my parents,
03:04one pound is only equivalent to nine or maybe slightly higher than nine renminbi.
03:10That is nearly a six, like 40% appreciation by yuan.
03:15So I think in long term, renminbi is reflecting China's economic growth over long term.
03:23If you look at since 2025, just near term, bring it to near term.
03:28Since 2025, renminbi has appreciated nearly 9%.
03:33So I say it is a reflection of the underlying economic, which is fairly reflected, one.
03:39Second, it's also the interest rates differentials.
03:43In the developed market, we are raising interest rates,
03:47where in China, clearly they are easing, they are helping the market,
03:50they are reducing, they are lowering their interest rates.
03:53So the differential also driven somehow, or play a big factor in the currency.
03:58Yeah, absolutely.
03:59Xiaolin Chen, thank you so much.
04:01There is a lot more to this than just the value of the currency.
04:06Successful exports depend on a lot of factors.
04:10Thank you so much for your insights.
04:11Really appreciate it, Xiaolin Chen.
