‘No downward spiral for yuan’: China’s central bank tries to play down fears of further depreciation, currency war
Wednesday's surprise move by the People’s Bank of China added to concerns over the health of the world’s second largest economy and fuelled worries of a possible 'currency war' in Asia
The chief economist of China’s central bank allayed concerns about a steady depreciation of the yuan following a one-off devaluation of the currency on Tuesday, cooling speculation of a currency war with other countries.
The People’s Bank of China cited the mainland’s economic fundamentals as a strong cushion against a potential further fall in the currency.
“Based on fundamentals, our key economic data all supported a stable yuan,” said PBOC chief economist Ma Jun, in a commentary published by the state newspaper . “China’s economic fundamentals obviously fare much better than those economies which face huge pressure to devalue their currencies.”
He added that China’s current-account surplus, huge foreign reserves and a healthy fiscal situation would prevent the country’s currency from being locked in a downward spiral.
The central bank also said in a statement on Wednesday morning that there was no basis for a sustained yuan depreciation based on the international and domestic economic situation.
It said the yuan’s position was supported by a number of factors such as a moderately fast growth of 7 per cent in the first half, a trade surplus of US$305.2 billion, growing demands of yuan in global trade and investment and the assimilation of the US Fed’s forthcoming interest rate hike, as well as China’s large foreign exchange reserves.
