China’s furious retaliation to US trade war see Dow Jones plunges 767 points and Apple shed £27 BILLION of its value
CHINA'S vengeance during the spiralling US trade war saw the Dow Jones plunge 767 points and Apple shed £27billion of its value.
The US dollar weakened on Monday after Washington criticised Beijing as a "currency manipulator", marking a sharp escalation in the year-long trade dispute between the two economies.
Wall Street suffered its biggest one-day loss since December on Monday after Beijing allowed its yuan to fall past the politically sensitive level of seven to the dollar for the first time since the global financial crisis, sending global financial markets into a tailspin.
The Asian stock market on Tuesday saw the yuan fall further, after the US Treasury Department officially labelled Beijing a currency manipulator, a status that opens the way to possible additional sanctions.
Blaming the decline on "trade protectionism", China's action followed Donald Trump's threat last week to slap punitive tariffs to an additional $300billion of Chinese imports.
The Ministry of Commerce announced it was suspending promised purchases of American farm products.
As a result, technology stocks bore the brunt of Monday's selling, with Apple sliding 5.2 per cent. The tech depends on Chinese factories to assemble its iPhones.
China is also the only country outside the US that accounts for more than 10 per cent of Apple's sales.
China dropped the price of their currency to an almost historic low. It's called 'currency manipulation'. Are you listening Federal Reserve?
US President, Donald Trump
The US Treasury Department said on Monday it had determined for the first time since 1994 that China was manipulating its currency, knocking the US dollar sharply lower and sending China's offshore yuan to a record low.
Treasury Secretary Steven Mnuchin announced that Washington would complain to the International Monetary Fund so it could eliminate unfair competition from Beijing.
A fuming Trump tweeted: "China dropped the price of their currency to an almost historic low.
"It's called 'currency manipulation'.
"Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time."
He added: "Based on the historic currency manipulation by China, it is now even more obvious to everyone that Americans are not paying for the tariffs - they are being paid for compliments of China and the US is taking in tens of billions of dollars!
"China has always used currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers' wages and harm our farmers' prices. Not anymore!.
"China is intent on continuing to receive the hundreds of billions of dollars they have been taking from the US with unfair trade practices and currency manipulation.
"So one-sided, it should have been stopped many years ago!"
'COMPETITIVE DEVALUATION'
Eswar Prasad, a Chinese financial expert at Cornell University, told the Financial Times: "The US Treasury's designation of China as a currency manipulator signals that the trade war is expanding into an all-out and open economic warfare between the two countries."
But the People's Bank of China (PBOC) has hit back at America, warning that designating China as a currency manipulator seriously harmed international rules.
The offshore yuan managed to come off an all-time low on Tuesday after Beijing appeared to take steps to prevent the currency from sliding further.
Chinese leaders have promised to avoid "competitive devaluation" to boost exports by making them less expensive abroad.
But regulators are trying to make the state-controlled exchange rate more responsive to market forces, which are pushing the yuan lower.
Trump's tariff hikes have put downward pressure on the yuan by fuelling fears economic growth might weaken.
The yuan has lost 5 per cent against the dollar since hitting a high in February of 6.6862 to the dollar.
That helps exporters cope with tariffs of up to 25 per cent imposed by Trump on billions of dollars of Chinese goods.
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The Chinese central bank governor, Yi Gang, tried to reassure investors, promising late Monday that Beijing will stick to commitments "not to use exchange rates for competitive purposes."
Yi said that the People's Bank of China was "committed to maintaining the basic stability" of the yuan "at a reasonable and balanced level.
The central bank sets the exchange rate each morning and allows the yuan to fluctuate by 2 per cent against the dollar during the day.
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