Yuan is at right level, says senior PBoC official

Yuan is at right level, says senior PBoC official

Customers are served at a currency exchange shop in Shanghai. (Reuters photo)
Customers are served at a currency exchange shop in Shanghai. (Reuters photo)

BEIJING: China's yuan is at an appropriate level currently and two-way fluctuations in the currency will not necessarily cause disorderly capital flows, according to a senior official at the People's Bank of China.

The yuan has weakened nearly 2.4% since US President Donald Trump threatened early this month to impose more tariffs on Chinese goods from Sept 1, though there are signs China is trying to stem the declines.

"The current level of RMB exchange rate is appropriately aligned with fundamentals of China's economy and market supply and demand," Zhu Jun, head of the central bank's international department, told Reuters in an interview yesterday.

Zhu said China was "shocked" by the US Treasury Department's move last week to label the country a currency manipulator, hours after Beijing let the yuan slide past the key seven-per dollar level to its lowest level since the global crisis.

But she asserted that China would be able to "navigate all scenarios" arising from the Trump administration's decision.

"The real aim of the US currency manipulator label is to disrupt China's financial markets and its economy,'' said Chen Yuan, former chairman of the China Development Bank -- the country's biggest policy bank.

"The US step to list China as a currency manipulating country is an important action to upgrade the trade war into a financial war," Chen, who remains an influential figure on economic issues, told a forum over the weekend.

Zhu told Reuters that in the short run, external shocks would play a role by influencing the yuan's movements.

"That said, as long as RMB moves in an orderly manner based on market supply and demand, such movements in either direction do not necessarily mean disorderly movement of capital flow," she said.

The yuan is also known as renminbi, or RMB.

Zhu reiterated that recent yuan volatility was a normal market reaction to escalating trade tensions, adding "If it's preventing such responses that would constitute real manipulation."

Analysts say a weaker yuan could help China's ailing exporters to cope with higher US tariffs amid an escalating trade war, but any sharp yuan drops could fuel capital outflows as the world's second-largest economy faces increased headwinds.

Chinese leaders have repeatedly pledged that they would not resort to competitive currency devaluation to support exports, or use the currency as a tool to cope with trade disputes.

Zhu said the yuan would be supported by China's solid economic fundamentals, a stable debt ratio, contained financial risks, adequate foreign exchange reserves, and favourable interest rate spreads between China and major advanced economies.

"Over the medium and long term, we have full confidence in RMB as a strong currency," she said. reuters



Do you like the content of this article?
COMMENT

Thais infected

Three Thais aboard the virus-hit cruise ship Diamond Princess confirmed infected with Covid-19 disease, as passengers continue to disembark after the quarantine ends.

13:04

Smog again covers Bangkok

Unhealthy smog blanketed most of greater Bangkok on Thursday morning, blamed on traffic congestion and stagnant air, the Pollution Control Department reported.

12:39

CRC shares steady on debut

The share price of Central Retail Corporation Plc (CRC) held steady during the first day of trading Thailand's largest-ever market capitalisation equity.

12:27