Yuan rally thickens China’s capital flight plot

In the homestretch of 2023, China is calming fears for the year ahead that it might engage in a race to the bottom on exchange rates. In recent days, China’s biggest state-owned banks bought the yuan in unison to support the currency. By swapping yuan for dollars in onshore markets and selling those dollars in spot markets, major banks are reassuring traders worried Beijing might chase the falling Japanese yen lower. There are a few possible explanations for why China is putting a floor under the yuan. One is to reduce default risks among property developers servicing offshore debt. Another is to avoid fresh trade tensions with Washington. Beijing also wants to stanch the capital outflows now making global headlines.