Economists at Commerzbank note the increasing perception that investments in China are under pressure due to factors that were perceived as less relevant in the past. Thus, bearish pressure is starting to mount around the Chinese yuan.

CNY-pessimism

“In a world in which households are increasingly considering ethical criteria for their consumption and investment decision the difference between the political systems of the West and the one in China constitutes an increasing reputational risk for Western companies and institutional investors.”

“I get the impression that recently autocratic regimes are being seen as a governance risk.”

“The covid strategy of the Chinese regime illustrates that those who thought that Chinese policy was focussed on high growth as its ultimate goal were wrong. The logical conclusion is likely to be that growth is always merely an interim goal for the Chinese leadership. An investment and growth supporting policy can only be expected for as long as it supports other aims.”

“So far, free-flowing export revenue is supporting CNY. If that eases, once global demand for durable goods normalises, or when the West slides into a recession, the renminbi is likely to get under increasing pressure.”