China may let yuan slide up to 15pc to counter Trump

China could allow its yuan to depreciate by as much as 10 to 15 percent in response to any trade wars unleashed by President-elect Donald Trump, according to JPMorgan.

The investment bank is penciling in an average effective tariff of 60 percent on China, up from the current 20 percent. That could potentially hurt 2025 economic prospects, slowing growth to 3.9 percent from 4.8 percent in 2024, the note read.

BNP Paribas said China's economic growth will decrease by two percentage points from 5 percent this year to 3 percent if the planned 60 percent tariff rate comes true. While the bank believes it will not happen, as most of Trump's cabinet picks are billionaires with a lot of businesses in the mainland, such as Elon Musk, the 60 percent tariff rate will face opposition.

JPMorgan bets Beijing will roll out more stimulus measures to prop up the tepid economy and sees the yuan depreciating by 10 to 15 percent in response to tariffs.

The yuan was at 7.26 per US dollar yesterday, weakening by more than 2 percent since Trump's presidential election win on November 5. The number was close to the 7.3 per US dollar level that authorities have been trying to defend, as a push through this level would increase volatility for Chinese financial markets, which the People's Bank of China would want to avoid, according to a Fitch solutions company BMI.

The Australia and New Zealand Banking Group predicted the yuan will weaken to 7.5 per US dollar at the end of 2025, then rebound in 2026.

Major investment banks and research firms project offshore yuan to weaken to an average of 7.51 per US dollar through the end of 2025, the weakest level in more than 20 years, according to CNBC's calculation of forecasts from 13 institutions. However, Citibank expects China to signal a 5 percent growth goal for next year at a key meeting in December.

June Chen and Bloomberg