Yuan to gain from U.S.-China deal but vulnerable: ex-currency regulator

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SHANGHAI (Reuters) – The will benefit from a de-escalation of Sino-U.S. trade but is vulnerable to possible in cross-border capital flows, a former Chinese foreign currency regulator told the News.

The interim deal reached by Washington and Beijing means trade frictions have ameliorated, reducing uncertainty and boosting confidence in the yuan, the newspaper said, citing Guan Tao, a former official at the State Administration of Foreign Exchange.

Guan warned, however, that a slow recovery in global and lofty asset prices could cause global market fluctuations, which in turn could bring wild swings in cross-border capital flows that impact expectations regarding the yuan.

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Guan expected China to use both macroeconomic and structural monetary policy tools to counter an slowdown next year, China reported.

But China should learn lessons from Japan’s experience and refrain from using strong stimulus, which could result in asset bubbles and long-term economic stagnation, Guan was quoted as saying.

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Source: Investing.com

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