Se­nior IMF of­fi­cial sees no need for yuan in­ter­ven­tion

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

The re­cent fluc­tu­a­tions in the value of the yuan are largely in line with na­tion’s eco­nomic fun­da­men­tals, sug­gest­ing no ur­gent need for an in­ter­ven­tion by the cen­tral bank in the for­eign ex­change mar­ket, a se­nior of­fi­cial with the In­ter­na­tional Mone­tary Fund said in Bei­jing on Tues­day.

David Lip­ton, the IMF’s deputy man­ag­ing di­rec­tor, at­trib­uted the re­cent de­pre­ci­a­tion to a stronger dol­lar, driven by the US elec­tion and pos­si­ble in­ter­est rate hikes in the near fu­ture.

The yuan’s ex­change rate reached an eight-year low in the past sev­eral days, but when com­pared with other emerg­ing mar­ket peers, the cur­rency has not seen a ma­jor ad­just­ment, ac­cord­ing to Lip­ton.

The cen­tral par­ity rate of the yuan, set by the cen­tral bank, stood at 6.8779 on Tues­day, tick­ing up from 6.8985 the pre­vi­ous day, fol­low­ing 12 straight days of weak­en­ing.

In the mean­time, the yuan ex­change rate com­pos­ite in­dex on Fri­day strength­ened by 0.21 per­cent against a bas­ket of cur­ren­cies, com­pared with a week ear­lier, ac­cord­ing to China For­eign Ex­change Trad­ing Sys­tem data, which mea­sures the yuan’s per­for­mance against a bas­ket of 13 cur­ren­cies.

Lip­ton ap­plauded Bei­jing’s ef­forts to move ahead with re­forms to peg the cur­rency to a bas­ket of cur­ren­cies, al­low­ing for more fluc­tu­a­tion.

“The Peo­ple’s Bank of China has been giv­ing more con­sid­er­a­tion to a bas­ket of cur­ren­cies in­stead of just ty­ing to the dol­lar,” said Lip­ton, in re­sponse to con­cerns about sus­tained de­pre­ci­a­tion of the yuan and re­peated claims made by in­com­ing pres­i­dent Don­ald Trump, who ac­cused China of ma­nip­u­lat­ing the yuan’s ex­change rate.

The IMF en­cour­ages China to con­tinue to im­ple­ment ex­change rate re­forms, al­low­ing for more flex­i­bil­ity, ac­cord­ing to Lip­ton.

Ad­dress­ing the fu­ture im­pact of Trump’s pres­i­dency, Lip­ton said it is too early to spec­u­late.

Shar­ing sim­i­lar per­spec­tives, Liang Hong, chief econ­o­mist with China In­ter­na­tional Cap­i­tal Cor­po­ra­tion, said in a re­search note on Mon­day that it will take time to see how pol­icy will change when Trump as­sumes the of­fice.

“The mar­ket has been grad­u­ally get­ting ac­cus­tomed to Trump’s elec­tion win,” said Liang. “In­vestors will re­assess in­vest­ment and eco­nomic out­looks af­ter Trump takes his pres­i­dency, pos­si­bly lead­ing to greater fluc­tu­a­tions of the value of the dol­lar.”

Liang ex­pects de­pre­ci­a­tion pres­sure on the yuan will con­tinue for a while, mainly driven by the strong dol­lar, but there is a small like­li­hood of see­ing a ma­jor de­pre­ci­a­tion of the yuan in the medium-to­long term.

Lian Ping, chief econ­o­mist with the Bank of Com­mu­ni­ca­tions, also ruled out the pos­si­bil­ity of a sus­tained yuan de­pre­ci­a­tion, as eco­nomic fun­da­men­tals re­main un­changed.

Cai Fang, vice-pres­i­dent of the Chi­nese Academy of So­cial Sci­ences, said that it is good enough for China to see a 6.2 per­cent an­nual eco­nomic growth rate next year.

“Risks hid­den in the econ­omy, in­clud­ing the pil­ing up of debt risks, are more con­cern­ing than hit­ting a high growth num­ber,” said Cai.

Moody’s In­vestors Ser­vice Inc on Tues­day high­lighted the slow delever­ag­ing process in the 2017 out­look for non-fi­nan­cial cor­po­rates, amid con­tin­ued ro­bust GDP growth in China in 2017 and sta­bi­liz­ing com­mod­ity prices.

12 num­ber of con­tin­u­ous days dur­ing which the value of the yuan kept weak­en­ing against the dol­lar by Mon­day

David Lip­ton, deputy man­ag­ing di­rec­tor of the In­ter­na­tional Mone­tary Fund

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