Chinese Yuan Weakens As Government Abandons 2020 GDP Target

The Chinese yuan is weakening against its major currency competitors to end the trading week, driven by officials announcing that they are abandoning their gross domestic product (GDP) target for 2020. The yuan is also coming under pressure on US-China tensions regarding trade and Hong Kong. While the world’s second-largest economy has hit the reboot button, outside factors may pause its reopening.

For the first time, China will not establish a target for economic growth this year due to a myriad of uncertainties in the aftermath of the pandemic. Chinese Premier Li Keqiang confirmed the decision in a statement that at the nation’s annual parliamentary meeting.

I would like to point out that we have not set a specific target for economic growth this year.

This is because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the Covid-19 pandemic and the world economic and trade environment.

Li did reveal other economic targets. He said Beijing estimates an unemployment rate of 6%, up from last year’s objective of 5.5%. He also noted that the number of new jobs promised was about nine million, falling short of last year’s goal of 11 million. The consumer price index (CPI) target was set at 3.5%.
He reassured everyone that the government is not abandoning growth.
Observers believe that the government could provide a GDP target for next year as a result. Economists have reduced their GDP forecasts by more than half. For instance, China International Capital Corporation (CICC) slashed its real GDP growth estimate from 6.1% to 2.6%.
Meanwhile, all eyes are on US-China tensions after Beijing proposed implementing new security laws on Hong Kong. Washington rebuked the proposal as lawmakers submitted bipartisan legislation that would sanction officials who enforce the measures and punishing banks. This does not help as both sides engage in a war of words regarding trade.
The People’s Bank of China (PBoC) left the one-year loan prime rate at 3.85% and the five-year loan prime rate at 4.65%.
The USD/CNY currency pair rose 0.21% to 7.1304, from an opening of 7.1154, at 19:04 GMT on Friday. The EUR/CNY tumbled 0.17% to 7.7753, from an opening of 7.7889.
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