The People’s Bank of China (PBOC) is weighing a controlled 8-10% yuan devaluation to neutralize US tariff impacts, according to central bank insiders. The radical move would:
Mechanics:
- Allow USD/CNY to gradually move to 7.8-8.0 range
- Implement capital controls to prevent outflows
- Coordinate with state banks for market smoothing
Projected Impacts:
- Effectively cancel 25% US tariffs for Chinese exporters
- Boost export competitiveness in third markets
- Add 0.7% to China’s 2025 GDP growth
Risks:
- Potential capital flight ($150B estimate)
- Inflationary pressure (1.5-2% CPI impact)
- Global currency war escalation
“The calculus has changed,” said former PBOC advisor Yu Yongding. “When facing economic warfare, all tools must be considered.”
Contingency Plans:
- $650B in reserves for market intervention
- Bilateral currency swaps with 40 nations
- Digital yuan acceleration for trade settlement
