The yuan is widely expected to drop below the psychologically important rate of seven to a U.S. dollar for the third time in three years, amid an escalating trade war between China and the United States. But unlike in 2016 and 2018, when Beijing intervened to support the Chinese currency, People’s Bank of China Governor Yi Gang has indicated there are no “redlines” for the exchange rate this time. “Chinese growth is likely to be further derailed by the ongoing trade war and is expected to slow down. It would need to see a devaluation of the yuan to help boost the economy,” said Bruce Yam, Forex Strategist at Hong Kong broker Everbright Sun Hung Kai. He said he expected the yuan to devalue beyond seven per U.S. dollar in the coming months, hovering in the range of CNY6.68 to CNY7.15 in the medium term. State-owned Chinese lender Bank of Communications International and Swiss bank UBS too have forecast the Chinese currency to devalue beyond seven yuan per U.S. dollar in the next three months.

“Generally speaking, the depreciation of the yuan will benefit sectors such as exporters and mining firms, since the depreciation will help them reduce exporting costs or exploring costs,” said Kenny Ng, Securities Strategist at Everbright Sun Hung Kai. Shares of exporters, utilities and mining companies will benefit from a weaker yuan, while airlines, papermakers and Chinese companies with high U.S. dollar debt should be avoided, according to analysts. The onshore yuan – traded in mainland China – was changing hands for about 6.9354 a U.S. dollar last week, down 8.2% over the past year, while its offshore counterpart was down 8.6% in the same period to 6.9281, very close to the rate of seven yuan per U.S. dollar. The last time the yuan devalued below that rate was before the global financial crisis in 2008.

“A weakening Chinese yuan does not bode well for companies with high foreign currency debt. Real estate and airlines are sectors with domestic revenue but relatively higher U.S. dollar debt,” said BEA Union Investment Chief Investment Officer Henry Chan. Share prices of the three major Chinese airlines suggest their stock went down with the yuan, the South China Morning Post reports.