Would U.S.-China Financial Decoupling trigger Chinese Yuan depreciation?
The value of a currency depends on the sovereign credit rating of a country. There are two major factors affecting the currency value: one is the country's economic growth, which the growth changes are reflected by the country’s gross domestic product (GDP); the other is the amount of currency issued by the country. In other words, if GDP declines and the money supply keeps increasing, this means that the currency is going to depreciate; if GDP grows steadily and the money supply does not increase correspondingly, it means that the currency is going to appreciate. In addition. if US dollar appreciates, it means that other currency such as Chinese Yuan is going to depreciate accordingly in the international market. In the case of Chinese Yuan, if the U.S.- China financial decoupling occurs as US-China relations continue to deteriorate, the result will lead to a cliff-like depreciation of the Chinese Yuan.
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