Chinese forex regulator expects yuan to stay stable
Print Edition
A TOP Chinese central bank official said yesterday the yuan was the second-strongest currency in the world after the US dollar and will remain “very stable” as the country continues to push yuan’s internationalization and capital account convertibility.
Yi Gang, deputy governor of the People’s Bank of China and head of the foreign exchange regulator, also said China will not join the currency war to deliberately depreciate its currency.
Yi told reporters in Beijing yesterday that China’s economic conditions were sound enough to maintain the yuan’s value at a reasonable level.
“The US dollar is the strongest currency, and the yuan is the second-strongest,” Yi said.
He said the Chinese economic growth had been slower under “new normal,” but it was still relatively strong. Trade surplus was wide, and the allocation of market capital was good enough to support the yuan’s stability.
The comments came as investors and analysts are bearish over the yuan’s exchange rate after China started easing the monetary policies in November with two cuts in interest rates and a cut in reserve requirement for banks.
The yuan has shed more than 2.5 percent against the US dollar since November while a strengthening US economy has been driving up the greenback.
In comparison, the euro tumbled nearly 12 percent in the same period, and the yen lost 6.5 percent.
The yuan touched 6.27 per dollar this year, the weakest since 2012, and official data showed an increase in capital outflows.
Yi said the yuan will remain “very stable” over a long term but two-way volatility can be expected in the near term.
The yuan is currently allowed to be traded within 2 percent above or below a reference rate set by the central bank before the market opens each day.
Yi said internationalization of the yuan and capital account convertibility will be a natural progress after China allowed more international players into the domestic equity market through various investment programs, including the Shanghai-Hong Kong Stock Connect scheme.
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