State Coun­cil vows to main­tain yuan at ‘ ba­si­cally sta­ble’ level

China Daily (Canada) - - FRONT PAGE - By ZHAO YI­NAN zhaoy­i­nan@chi­nadaily.com.cn

China pledged to keep the yuan ex­change rate “ba­si­cally sta­ble” af­ter some econ­o­mists said the coun­try’s re­cent stock mar­ket rout threat­ened its fi­nan­cial sta­bil­ity and might lead to the cur­rency’s de­val­u­a­tion.

The yuan ex­change rate with ma­jor in­ter­na­tional cur­ren­cies will re­main sta­ble on a ba­sis that the gov­ern­ment con­sid­ers “ra­tio­nal and bal­anced” in a bid to boost con­fi­dence in the cur­rency, as China strives to join the Spe­cial Draw­ing Right sys­tem of the In­ter­na­tional Mon­e­tary Fund.

The SDR is an in­ter­na­tional re­serve as­set that sup­ple­ments the ex­ist­ing of­fi­cial re­serves of mem­ber coun­tries.

The pledge came from an ex­ec­u­tive meet­ing of the State Coun­cil, China’s Cab­i­net, presided over by Premier Li Ke­qiang on Wed­nes­day, as part of a pack­age of poli­cies de­signed to en­cour­age ex­port and im­port, as the world’s largest mer­chan­dise trader is likely to miss its an­nual trade tar­get for the fourth con­sec­u­tive year.

Other trade- sup­port­ing mea­sures is­sued on Wed­nes­day in­clude ex­pand­ing the im­port of pop­u­lar con­sump­tion goods, ad­vanced tech­nolo­gies and key equip­ment parts; the in­tro­duc­tion of a pi­lot stream­lined cus­toms pro­ce­dures na­tion­wide; and the re­duc­tion of trade com­pa­nies’ fees.

Also on Wed­nes­day, China’s econ­omy re­ported 7 per­cent growth in the sec­ond quar­ter, show­ing signs of sta­bi­liza­tion.

A state­ment re­leased af­ter the meet­ing said con­di­tions are “good” to reach the an­nual eco­nomic growth goal of about 7 per­cent, and lead­ers pledged to step up re­forms in the sec­ond half of the year to prop up the econ­omy.

China’s ex­ports picked up a stronger-than-ex­pected 2.1 per­cent on a year-on-year ba­sis to 1.17 tril­lion yuan ($ 188.4 bil­lion) in June, although two-way trade for the first six months fell 6.9 per­cent to $1.88 tril­lion, the Gen­eral Ad­min­is­tra­tion of Cus­toms said on Mon­day.

The fig­ure fell well be­low Bei­jing’s of­fi­cial tar­get for the year for trade growth of about 6 per­cent, and if China were to fail to reach this year’s tar­get, it would be the fourth con­sec­u­tive year that the goal has been missed.

GAC spokesman Huang Song­ping said on Mon­day that the ap­pre­ci­a­tion of the yuan is one of the rea­sons for slug­gish ex­ports.

The of­fi­cial ex­change rate of the yuan against the US dol­lar in the past six months strength­ened by 0.2 per­cent, while against the euro it strength­ened 6.9 per­cent and against the yen, 2.2 per­cent.

“A weaker Euro­pean econ­omy and the de­pre­ci­a­tion of the yen have led to a con­tin­ued de­cline in the global mar­ket,” said Bai Ming, a re­searcher with the Min­istry of Com­merce.

A sta­ble yuan would also help per­suade the In­ter­na­tional Mon­e­tary Fund to grant it re­serve-cur­rency sta­tus — a de­ci­sion due to be made later this year — and dis­cour­age cap­i­tal out­flows, ex­perts said.

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