For the first time since 2008, the Chinese yuan has slipped past 7 to the dollar—an important psychological threshold.
The country’s central bank appears to have deliberately allowed its managed currency to weaken to this point, following US president Donald Trump’s threat last week to impose tariffs on nearly all Chinese imports.
In a transcript of statements (link in Chinese) by China’s State Administration of Foreign Exchange, an unnamed regulator blamed foreign “protectionist measures” and tariffs on Chinese goods for the yuan’s slide, before reiterating that such fluctuations were entirely normal.
In part, this is an attempt to mitigate potentially significant public anxiety. “Cracking seven,” as it’s sometimes known, carries psychological importance for ordinary Chinese, despite repeated reassurances (paywall) from officials that no “one number is more important than the other number.”
In today’s statement, the Chinese regulator resorted to the soothing power of poetic metaphor to tell the story of the tumbling exchange rate. “This ‘7’ is not an age that is irreversible, nor is it a dam that will collapse once it’s broken,” the regulator said. “‘7’ is more like the water level of a reservoir: it rises during rainy seasons and falls during dry ones.”
And if those calming, aqueous images don’t do the trick, an officially sanctioned cartoon explainer (link in Chinese) about the foreign exchange market circulated on Weibo, telling the story of the merry citizens of two islands who trade their fruit. (As it happens, six orange dollars equal one banana dollar.) “Which is better? High or low exchange rate? It depends,” the voiceover decrees.
Chinese looking for a more in-depth view about how their country’s currency is managed, however, may be left wanting. Roughly halfway through, the video notes, breezily, “For example, in China, RMB to USD’s exchange rate is based on the international market, plus governmental control—which we will not discuss in detail here.”