China Regulator Warns Of Losses For Those Betting Against Yuan

China’s banking and insurance regulator has warned that short sellers shouldn’t bet against the yuan, despite the fact that the currency has lost more than 2.5 percent against the U.S. dollar.

“Short-term fluctuation of the yuan exchange rate is normal, but in the long-run, China’s economic fundamentals determine that the yuan will not depreciate persistently,” Xiao Yuanqi, the spokesman for the China Banking and Insurance Regulatory Commission (CBIRC), told a finance forum in Beijing. “Those who speculate and short the yuan will for sure suffer heavy loss.”

In the meantime, sources told Reuters that China’s central bank plans to use foreign exchange intervention and monetary policy tools to stop the Chinese currency from falling past the key 7-per-dollar level in the future. It is currently less than a tenth of a yuan away from the 7-per-dollar level considered as a floor.

Xiao added that the country must “be especially vigilant about money from overseas moving in and out in large quantities, and hot speculative money, and we must resolutely fight bubbles in real estate and financial assets.”

The yuan’s troubles come as trade talks between the United States and China have stalled. U.S. President Donald Trump has threatened to install additional tariffs of up to 25 percent. Despite this, Xiao doesn’t seem worried.

“First of all, most of the (Chinese) products exported to the United States are very suitable for domestic sales. China is in the middle of a ‘consumption upgrade,’ so a huge market with rapid expansion will absorb a large amount of them without ‘crowding out’ existing consumers,” he said.

Xiao added that even though the United States recently banned American firms from doing business with Huawei Technologies, China would continue to pursue its own technological advancements.

“History has long proved and will continue to prove that sanctions and blockades will not prevent a country’s technology and economic development,” he said. “Instead, they will inspire its independent research and development and accelerate its own technological progress.”