Former officials of China's central bank said the country may be heading to a lasting currency war with the U.S. amid escalating trade tensions, Bloomberg News reported Aug. 10.
On Aug. 4, the Chinese yuan dropped below 7 per U.S. dollar for the first time since May 2008 after the People's Bank of China weakened its daily currency fixing.
The U.S. Treasury Department then accused China of currency manipulation as the move came just days after President Donald Trump announced that the U.S. will impose a 10% tariff on Chinese goods beginning Sept. 1.
Speaking at a China Finance 40 meeting held in Yichun, Heilongjiang, former PBoC Deputy Governor Chen Yuan reportedly said the currency manipulator label "signifies the trade war is evolving into a financial war and a currency war".
The ongoing trade conflict between the U.S. and China could also escalate into other areas, such as politics, military and technology, former PBoC Governor Zhou Xiaochuan warned at the event.
Earlier in June, PBoC Governor Yi Gang noted that the Chinese yuan will temporarily face depreciation pressure due to the ongoing trade dispute between the world's two largest economies.
Additionally, analysts previously predicted that the Chinese yuan could weaken past 7 per dollar if trade tensions persist or worsen in 2019, which would possibly weaken currencies across the Asia-Pacific region.