“How are you going to negotiate firmly with your banker?” Asked then-US Secretary of State Hillary Clinton in 2009. This phrase, quoted in a telegram revealed by Wikileaks, summed up Washington's complicated relationship with China, which controlled the world's largest power public debt for a trillion dollars. A decade later, the Asian country slightly increased its US bond portfolio. But that has not prevented today's President Donald Trump from using all weapons against his great global competitor, who remains his biggest banker.
In this conflict, China used a new weapon this week: the exchange rate. Following Trump's announcement of new tariffs starting in September - a 10 percent rate for Chinese products worth $ 300 billion - Beijing responded by ending what had previously been a taboo: its central bank has let the dollar pass. psychological barrier of seven yuan.
With this (moderate) devaluation, China has raised fears that the trade conflict, which has already turned into a technological one, will move to a currency war. The experts consulted doubt that such a point is reached. China has so far halted the fall of its currency, which would have been greater without government intervention. The dollar, in turn, is overvalued, between 6% and 12%, according to a July IMF report. The yuan may gradually lose value, but analysts do not expect a sudden collapse because, among other reasons, it would cause a capital flight that no one in Beijing wants.
