ANALYSIS: Economic Pressure Forces China’s Central Bank to Implement Gradual Currency Depreciation Policy

‘China has no choice but to take this approach because it cannot continue to maintain the exchange rate,’ Frank Tian Xie, a professor in business, said.

A man wearing a mask walks past the headquarters of the People's Bank of China, the central bank, in Beijing, China, on Feb. 3, 2020. Jason Lee/Reuters

Against the backdrop of a strengthening U.S. dollar and a continuous decline in the Chinese yuan’s exchange rate against the dollar, China’s central bank, the People’s Bank of China (PBOC), has implemented a policy of gradual yuan depreciation, drawing significant attention. Since the beginning of the year, the yuan has depreciated by 2.1 percent against the dollar.

The PBOC has long tightly controlled the exchange rate of the yuan against major world currencies, such as the U.S. dollar.