Chinese media outlets have moved to tamp down fears that Turkey's financial crisis would impact China.
The Turkish Lira, which plunged 17 percent on Friday in its biggest one-day drop since 2001, has lost more than 34 percent of its value against the US dollar since January, according to the BBC. It is now trading at an all-time low. The situation was compounded by a tweet from US President Donald Trump announcing his intention to double tariffs on steel and aluminum imports from Turkey to 50 percent and 20 percent respectively.
A non-government Chinese think tank established by the Phoenix Media Group blamed the ongoing crisis on Turkey's high inflation, excessive current account deficit and foreign-currency debt, a sluggish domestic economy and frequent unrest around the country.
The Economic Daily commented that the depreciation of the Turkish Lira would cause the depreciation of the Euro and a resulting appreciation of the US dollar. This was expected to grow inflation in emerging countries, such as India, the Philippines and the Czech Republic, pushing the nations to tighten monetary policy. However, rising interest rates will increase the cost of corporate and residential debts, which will in turn put downward pressure on the economy.
Chinese analysts are still optimistic about Turkey’s impact on China. The Economic Daily pointed out that although there would probably be shocks to the offshore market RMB exchange rate, Hong Kong stocks and even A Shares, the real and direct shock was not serious enough to affect China’s trade, because the trade volume between the two nations is small.
Yet, the Economic Daily warned China should be alert for the chain reaction in the emerging economies affected.