Chinese yuan shows resilience amid depreciation against U.S. dollar: central bank deputy chief

The Chinese yuan demonstrated strong resilience in 2024 despite a depreciation against the U.S. dollar, Xuan Changneng, vice governor of the People's Bank of China (PBOC), the country's central bank, said on Tuesday.

Speaking at a press conference in Beijing about the financial sector's role in underpinning the country's high-quality development, Xuan attributed the yuan's resilience to China's stable economic fundamentals and proactive policy measures.

"The PBOC formulates monetary policy primarily based on domestic economic and financial conditions, while also taking into account the balance between internal and external factors. In 2024, amid a volatile and complex international landscape, multiple factors drove fluctuations and strengthening in the U.S. dollar index. China's foreign exchange market showed a remarkable resilience. The yuan exhibited two-way fluctuations in exchange rate and overall stability under the complex circumstances, outperforming many other major currencies. This resilience has created favorable conditions for China to independently implement monetary policies and played a positive role in stabilizing the economy and foreign trade," Xuan said.

The yuan depreciated by 2.8 percent against the U.S. dollar in 2024, closing at 7.2988 by the year-end. However, the yuan exchange rate index, which measures its value against a basket of currencies, or the CFETS, rose by 4.2 percent to 101.47. In the same period, the U.S. dollar index surged by 7 percent, further highlighting the yuan's resilience, according to Xuan.

Looking ahead, Xuan acknowledged challenges in the global economic landscape but expressed confidence in the yuan's stability.

"The external environment may become increasingly complex, severe and uncertain in a foreseeable future period of time. However, China's economic fundamentals remain solid, with a sustained current account surplus, independent and balanced cross-border capital flows, ample foreign exchange reserves, and a resilient foreign exchange market. These factors have injected certainties into and provided strong support for maintaining the yuan's overall stability in exchange rate," he said.

Xuan pointed to policy measures and foreign exchange market maturity as key factors underpinning the yuan's strength.

"China's macroeconomic foundation is more robust. A package of incremental policies introduced last year, particularly after September, are expected to deliver tangible results in succession. The Central Economic Work Conference outlined the implementation of more proactive fiscal measures and moderately accommodative monetary policies for 2025, which will further reinforce the positive momentum of China's economic recovery," he said.

"Foreign exchange reserves remain stable, serving as a cornerstone for maintaining economic and financial stability. The foreign exchange market becomes more resilient, with participants showing greater maturity, more rational trading behaviors, a growing focus on managing exchange rate risks through an increasing number of hedging tools. All these have laid an important microeconomic foundation for the steady operation of the foreign exchange market and the balance between foreign currency supply and demand. Currently, about 30 percent of cross-border trade in goods are settled in the yuan, and 27 percent of enterprises use foreign exchange hedging tools. We can see a pretty good microeconomic foundation for the foreign exchange market from these data," said the central bank deputy chief.

Chinese yuan shows resilience amid depreciation against U.S. dollar: central bank deputy chief

China's recently announced visa-free policy for five Latin American nations, including Peru, has triggered a wave of enthusiasm among locals to visit and learn more about China, while business representatives have also hailed the waiver as a promoter of new commercial, academic and investment opportunities, and a milestone in bilateral relations.

Holders of ordinary passports from Brazil, Argentina, Chile, Peru and Uruguay will be granted visa-free entry on a trial basis starting from June 1, according to the Chinese Ministry of Foreign Affairs.

Ordinary passports holders from these five countries, who come to China for the purposes of business, tourism, family visits, or exchanges and visits, and transits with stays for no more than 30 days, can enter China without a need to apply for a visa.

The visa-free policy has generated great enthusiasm among Peruvians, who see this measure as an opportunity to boost tourism, strengthen trade ties between the two countries.

"It gives us more opportunities to travel to the country, to visit it, to learn more about its culture or to start a business," said a Peruvian resident.

"It is very interesting, because it gives us the chance to go abroad and learn more about Chinese culture, see their technological and economic development that has come through decades of economic progress," said another resident.

Peruvians believe that this news is a great opportunity for those who have always dreamed of getting to know the Asian giant up close, as students and young professionals.

"I think it would be a good experience to travel there, to enjoy both the Chinese culture and tourist sites," said another resident.

"It is a very good opportunity for all Peruvians who are here, especially for those of us who have no facilities to go to other countries," said another resident.

Tourism associations in Peru expect the number of tourists traveling to China to grow significantly. And for the major foreign trade union in Peru, this visa exemption policy will also facilitate business travel and boost exports.

"It also includes business activities for up to 30 days, so this certainly has an important effect on the trade issue. Last year, our trade with China hit about 41 billion U.S. dollars. Just in the first quarter of this year, from January to March, there has already been an increase of about 32 percent. Trade and investment, especially large-scale ones, certainly require physical presence. No one invests significant amounts in places where they do not know. Hopefully, this free exchange of people or flows of people can trigger a new wave of Peruvian investments in China," said Luciano Paredes, manager of corporate affairs of ComexPeru.

In Peru, it is expected that in the future this measure will be accompanied by campaigns to promote Chinese destinations, considering that in this way China and Peru are taking another step towards a strategic relationship that promises mutual benefits.

Peruvians advocate for travel, economic opportunities brought by China's visa-free policy