Steady as she goes

Steadily re­cov­er­ing econ­omy to give strong sup­port, NBS spokesman says

China Daily (USA) - - FRONT PAGE - By WANG YANFEI wangyan­fei@chi­

A strong dol­lar and ex­ter­nal un­cer­tain­ties are cre­at­ing short-term de­pre­ci­a­tion of the yuan, but the long run looks steady.

A strong dol­lar and ex­ter­nal un­cer­tain­ties are cre­at­ing pres­sure for short-term de­pre­ci­a­tion of the yuan, but eco­nomic fun­da­men­tals will help sta­bi­lize the ex­change rate in the long run, the spokesman for the Na­tional Bureau of Sta­tis­tics said on Wed­nes­day.

The on­shore ex­change rate rose for the first time in nine days after data on Wed­nes­day showed that the na­tion’s eco­nomic growth ex­panded by 6.7 per­cent year-on-year in the first three quar­ters of the year, eas­ing some con­cerns of con­tin­ued dep­re­ca­tion.

“Re­cent de­pre­ci­a­tion of the yuan was mainly driven by ex­ter­nal fac­tors, where ris­ing ex­pec­ta­tions of in­ter­est rate hikes in the United States and un­cer­tain­ties brought by the slowly re­cov­er­ing global econ­omy played ma­jor roles,” said Sheng Laiyun, spokesman for the NBS, “but the cur­rency does not face medium- to longterm de­pre­ci­a­tion pres­sure.”

“A steadily re­cov­er­ing econ­omy would be the strong­est sup­port for a rel­a­tively sta­ble ex­change rate,” he said, adding that a trade sur­plus would also fend off the risks of a fur­ther sub­stan­tial de­pre­ci­a­tion.

Xu Gao, chief econ­o­mist of China Ever­bright Se­cu­ri­ties Co, said the mar­ket has be­come ac­cus­tomed to twoway volatil­ity.

“Al­though the yuan has room for de­pre­ci­a­tion in the short run, it will not en­ter a de­pre­ci­at­ing path be­cause re­cov­ery of the econ­omy in the United States re­mains weak,” Xu said.

Xu made the re­marks after the yuan fell sharply ver­sus the dol­lar in the past two weeks, fol­low­ing the yuan’s in­clu­sion in the Spe­cial Draw­ing Rights bas­ket of the In­ter­na­tion­alMone­tary Fund at the be­gin­ning of the month.

Mar­ket watch­ers ex­pected a sharp de­pre­ci­a­tion soon after the SDR in­clu­sion, con­sid­er­ing that pol­i­cy­mak­ers need to fur­ther lib­er­al­ize the ex­change rate con­trols.

Sheng said the SDR in­clu­sion can help sta­bi­lize the ex­change rate, since it will prop up the de­mand for the yuan in the in­ter­na­tional mar­ket.

“Cen­tral banks will raise the de­mand for the yuan after it be­comes a re­serve cur­rency,” said Sheng.

Bu Yongx­i­ang, deputy di­rec­tor of the re­search in­sti­tute of the Peo­ple’s Bank of China, the cen­tral bank, said the short-term im­pact brought by the SDR in­clu­sion on ex­change rate fluc­tu­a­tion will be min­i­mal.

“The mes­sage is that it marks a new­start for China in deep­en­ing re­form in the fi­nan­cial sec­tor and boost­ing cap­i­tal-ac­count con­vert­ibil­ity, and fur­ther strength­ens our ex­change rate pol­icy and makes it more mar­ket-ori­ented, flex­i­ble and trans­par­ent,” he said.

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