China's Yuan Under Pressure: Trump Comeback Threatens Xi Jinping's Currency Ambitions

China's President Xi Jinping is striving for a stable and influential currency that can play a more significant role in global trade. However, the return of Donald Trump to the political stage could undermine these ambitions. Analysts predict that during a possible second term for Trump, the Yuan could face an increasing downward trend, fueling concerns of a renewed trade war. Some experts believe that by 2025, the Yuan will reach a historic low against the dollar, with pessimists suggesting a decline of about 10%. Compared to the last phase of trade conflicts, the Yuan is more vulnerable today. Yields on Chinese government bonds are significantly lower than those in the United States, foreign companies are withdrawing, and modest economic growth combined with deflation fears could lead to further interest rate cuts. Adam Wolfe from Absolute Strategy Research emphasizes that pressure on the Yuan could continue to increase. While the Chinese central bank will support the Yuan for stability reasons, it might consider a targeted devaluation during a trade conflict to protect the export economy and expand negotiation leeway. This market dynamic encourages investors to increasingly bet on a weaker Yuan. On November 14, the onshore Yuan fell to an intraday low of about 7.248 against the dollar, the weakest level in three months. Options traders are speculating on further declines. Banks like BNP Paribas, UBS, and Société Générale expect the Yuan to continue to weaken. Forecasts suggest that the value could fall between 7.4 and 7.7 next year, especially if Donald Trump implements his plans to impose drastic tariffs on Chinese goods. Some analysts from Jefferies Financial Group even predict a rise to 8 Yuan per dollar by 2025. A weaker Yuan could help China's exports regain competitiveness; however, it remains unclear to what extent the Chinese central bank will manage the devaluation. The greatest challenge is to master the balancing act between economic stability and trade advantages.