China's Yuan Pessimists Are Multiplying
- Individuals’ $50,000 conversion quota coming up for renewal
- This is the single biggest threat to yuan now, economist says
Yuan Flight Boosts Funding Costs
This article is for subscribers only.
China is tightening capital controls as the imminent renewal of a foreign-exchange conversion quota adds to depreciation pressure on the yuan.
Chinese citizens are allowed to convert $50,000 worth of yuan annually, and with the new year less than a month away, the potential for capital flight is building. Individuals and households are the biggest threat to the yuan now, because they can easily be influenced by short-term volatility, according to Xia Le, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria SA. The yuan has weakened 3.1 percent this quarter amid concern the Federal Reserve will raise borrowing costs, strengthening the dollar.