China is readying an arsenal of measures to fight back the U.S. tariffs and their effects as part of the ongoing trade war. According to Reuters, who was tipped by sources on condition of anonymity due to lack of authorization to talk about market matters publicly, the People’s Bank of China (PBOC) has issued informal guidance requiring state banks to stop purchases of U.S. dollars to maintain the stability of the yuan, and step up the checks for private purchases of the currency.

People with knowledge of the matter revealed this, stressing that China would not resort to a policy of devaluing the yuan to deal with the effects of the tariff blowback. State banks were selling dollars and purchasing yuan this Wednesday to support the Chinese currency, which recently touched multi-year lows.

Introducing a mild devaluation would help China remain competitive in international markets, but a major one would introduce monetary risks.

A policy advisor consulted by Reuters stated:

A sharp depreciation will not happen as that could hurt market confidence, but a modest depreciation will help exports. We should also assist key enterprises through subsidies, tax rebates, or market diversification.

While Trump has recently stated that China was studying how to reach a tariff deal with his administration, this move hints at China preparing for a long trade war by defending its currency.

Contrarily, Skybridge Capital founder Anthony Scaramucci believes yuan devaluation will happen. He also predicted that China would, in addition to devaluing its currency, dump its U.S. treasuries and ramp up intellectual property theft. Maelstrom head Arthur Hayes explained this devaluation, if it comes to happen, could ignite a bitcoin rally as capital flows out of China.

Read more: China Will Strike Back: Scaramucci Predicts Currency War, IP Theft, Treasury Sell-off

Read more: Arthur Hayes: Yuan Devaluation Could Ignite Bitcoin Rally as Capital Escapes China

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