China Wants to Hit Back at Trump. Its Own Economy Stands in the Way. – The New York Times

It could also seriously escalate tensions. Mr. Trump has repeatedly complained that Beijing weakens the renminbi in order to take advantage of the United States. A cheaper currency gives Chinese factories an advantage when selling goods in the United States.

In fact, Beijing right now is preventing, not enabling, a weaker currency. The renminbi would weaken if Chinese officials relaxed their grip.

China may do exactly that. They make take a freer hand with the currency, letting it weaken toward 7 renminbi against the dollar, a psychologically important marker that would be likely to get the Trump administration’s attention if it was passed.

“Psychologically, it is important, but economics trump politics at the moment,” said Shaun Roache, chief economist for Asia Pacific at S&P Global.

However, officials would have to risk letting the currency fall too quickly, which would set off panic in China and trigger outflows.

On Friday, the renminbi dropped to its lowest level so far this year against the dollar, hovering at 6.9590 renminbi.