Last year, the commercial war between the United States and China did not leave the population, let alone investors, indifferent. Many traders saw the Asian currency as a safe refuge haven in the face of global circumstances.
Thus, in 2020, investors started to invest in China, resulting in gains in the Chinese yuan and strengthening the Land of the Dragon’s ambitions for currency internationalization. Foreign investors increased their purchases of Chinese bonds by more than 1 trillion yuan (153 billion dollars), which caused the Yuan to reach 7.18 against the dollar in May of that year.
The gradual rise in Treasury yields has narrowed the yield spread on Chinese government bonds by around one percentage point from the all-time high. All indications show that the yuan may well undergo some changes in its exchange rate. In March 2021 alone, the currency fell by as much as 6.4 percent against the dollar.
The diplomatic “war” between the US and China seemed to have ended with Trump’s departure from the White House. But, this year, after the last unsuccessful meeting between the advisors of both countries, plus the American nation’s accusations towards Xinjiang regarding human rights, -a fact that Beijing took note of-; it seems that tensions between the two giants began to rise again making the yuan less attractive to investors.