White House economic adviser Larry Kudlow said the yuan is falling partly because China is a “lousy investment,” trash talking the world’s second-largest economy after it threatened more retaliatory tariffs on U.S. exports.
“Some of the currency fall though I think is just money leaving China because it’s a lousy investment, and if that continues that will really damage the Chinese economy,” Kudlow said in a Bloomberg Television interview Friday with Jonathan Ferro.
The People’s Bank of China earlier in the day was forced tostep in to prop up the yuan, imposing restrictions that make it more expensive to short-sell, after a record string of weekly losses.
“If money leaves China — and the currency could be a leading indicator — they’re going to be in a heap of trouble. And so I’m going to make the case that they are in a weak economic position. That’s not a good place for them to be vis-a-vis the trade negotiations,” according to Kudlow, who is director of the National Economic Council.
China earlier announced it has prepared a list of $60 billion worth of U.S. goods to hit with duties should the U.S. follow through on a plan to impose tariffs on an additional $200 billion of Chinese goods, as early as next month.
“It looks to me like the China economy is declining in growth,” said Kudlow. “It’s weakening almost across the board. And it looks like the People’s Bank of China is trying to pump it up by adding high-powered money and new credit.”
The last time China was hit hard by growth fears, the shock waves rattled financial markets around the world, including in the U.S. In August 2015, the People’s Bank of China stunned investors by lowering its target level for the yuan against the dollar, triggering a global selloff in stocks. Spillovers from that upset contributed to a sharp slowdown in U.S. growth in the second half of the year.
— With assistance by Jonathan Ferro, and Andrew Mayeda
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