China signals currency war truce ahead of Xi Jinping’s meeting with Donald Trump at G20 in Japan

China has signalled its intention to not “weaponise” the yuan’s exchange rate as a message of good faith ahead of next week’s meeting between President Xi Jinping and US counterpart Donald Trump at the G20 summit in Japan, according to an analyst.

To facilitate propping up the yuan just days before the two world leaders meet in Osaka, The People’s Bank of China (PBOC), China’s central bank, will sell 20 billion yuan (US$2.9 billion) of one-month bonds and 10 billion yuan of six-month bonds in Hong Kong on June 26.

It would be the third such central bank bill sale in Hong Kong after issuance twice in 2018, when the central bank decided to start a programme to sell regular short-term yuan-denominated securities to better manage yuan liquidity overseas. The PBOC announced last week it would sell bills in Hong Kong later this month, without specifying when or how much.

“China is sending a good faith message to the US trade delegation that they have no intention of weaponise the yuan,” said Stephen Innes, managing partner at Vanguard Markets Singapore.

“The US doesn’t want to remove tariffs until they have time to ensure 100 per cent compliance from China on trade issues. So this a further attempt to bridge the trust gap which is what’s been keeping these two sides apart on the tariff war.”