China Lifts Yuan Pre-Summit While Bessent Targets Yen — SkimNews
Get the Geopolitics newsletter
Daily geopolitics — wars, elections, sanctions, the diplomatic moves that move markets. Free.
- Pan Gongsheng's PBOC raised China's daily yuan fixing for an eighth straight day, pushing the currency to its strongest level since July 2022 ahead of Thursday's Trump-Xi summit.
- The yuan's strength is strategically timed to remove exchange rates from the summit agenda, while Beijing resists rate cuts that could unwind years of deleveraging or trigger property-developer defaults like those roiling China Vanke.
- Brad Setser at the Council on Foreign Relations pegs the yuan at 30% undervalued; the IMF recently revised its estimate to 21%, based on a GDP current account surplus of 3.7–3.8%.
- China's property sector holds roughly 70% of household wealth, fueling 'Japanification' risks that argue against a weaker yuan despite overcapacity in EVs, batteries and solar, per economist Daniel Muggleton.
- Treasury Secretary Scott Bessent is more focused on Japan's yen — trading near 1985 lows — than the yuan, partly because Japan holds $1.1 trillion in US Treasuries, the largest foreign hoard.
- China's US debt holdings fell to an 18-year low of $618 billion in July, reflecting Beijing's anxiety about dollar exposure amid Trump's attacks on Federal Reserve independence.
- The Trump-Xi summit is meant to extend the November 10 trade-truce deadline rather than deliver a 'grand reset,' according to the World Economic Forum's Miriam Schive.
Why it matters: By stabilizing the yuan, Beijing removes a major trade-war flashpoint from the Trump-Xi agenda and lets the November 10 truce extension proceed. But with Setser pegging the yuan at 30% undervalued and Bessent already selling euros to prop up the yen, the currency calm is a tactical pause — not a resolution.
Ask SkimNews
