The yuan lost value in response to China’s economy growing much less than expected. It barely surpassed the government’s estimate of 5% for 2023, marking one of the worst growth rates in over three decades.
This means that the rebound after the health crisis did not have the expected momentum and, on the contrary, set a low economic growth outlook for China going into 2024.
Gross Domestic Product improved in 2023
The Gross Domestic Product (GDP) of Asia’s largest economy registered 5.2%, or about 126 trillion yuan. This figure is an improvement on the figure obtained in 2022, which was 3% when the economy was affected due to the restrictions resulting from the pandemic. However, it is the worst result recorded by China since 1990 without taking into account the years affected by the pandemic.
Economic Rebound Post-COVID: Significant but Insufficient
With the return to normality after the COVID period, the economy experienced an initial rebound that allowed the yuan to trade much better in the market but gradually lost momentum as distrust grew in the country and consumption fell.
In addition, high youth unemployment and the real estate crisis are factors affecting the Asian country. Finally, exports also fell last year, recording the worst numbers since 2016.
President Xi’s Ambitious Vision: Transforming China into a Global Financial Titan
This week, China’s President Xi Jinping showed his country’s willingness to become an economic powerhouse in order to make its currency achieve global status. This is a clear signal that the president wants his currency to be used more around the world, as it currently needs to be used less compared to the size of its economic power.
Xi also pointed out that he needs a strong currency, a central bank, rules and regulations, financial institutions, trained personnel, and a firm economic base capable of withstanding what is necessary to strengthen its currency.
But there are already signs that the internationalisation of China’s currency is beginning to gain ground. The yuan overtook Japan’s yen as the fourth most crucial currency involved in international payments in November. The yuan accounted for about 24% of the country’s goods trade for about nine months last year, the highest figure recorded in recent years.
