China Strengthens Yuan Ahead of Trump-Xi Summit — SkimNews
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- PBOC Governor Pan Gongsheng guided the yuan stronger for an eighth straight day, the longest streak since 2023, pushing it to its strongest level since July 2022 in the days before the Trump-Xi summit.
- Xi Jinping's team is deliberately letting the yuan rise to take currency disputes off the table and remind Trump and Treasury Secretary Scott Bessent that the real 2026 exchange-rate fight is with Tokyo, not Beijing.
- CFR economist Brad Setser argues the yuan is 30% undervalued; the IMF recently raised its own estimate to 21% based on a GDP current account surplus of 3.7–3.8%, which Setser says is under-reported.
- The Trump-Xi summit is built around extending the November 10 expiry of the 2025 Busan trade truce, which suspended major tariff escalation and rare-earth export controls.
- Treasury Secretary Bessent is focused on the yen rather than the yuan, with Japan holding US$1.1 trillion in US Treasuries and the yen trading near 1985 lows.
- China's US debt holdings fell to an 18-year low of $618 billion in July, down from being the largest foreign holder during Trump's 2017–2021 first term.
- China's property sector still ties up roughly 70% of household wealth, and economist Daniel Muggleton warns that continued overcapacity investment in EVs, batteries, and AI risks deepening deflationary stagnation.
Why it matters: Beijing's currency move lets Xi sidestep a major flashpoint at Thursday's summit and shifts Treasury's pressure to Tokyo, where Japan holds $1.1 trillion in US Treasuries. With China's US debt holdings at an 18-year low of $618 billion, Beijing is also less exposed than during Trump's first term if dollar tensions escalate — a structural shift that strengthens Xi's hand in any post-summit negotiation.
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