China to keep yuan stable at reasonable level
CHINA will keep the yuan’s exchange rate stable at a reasonable and balanced level, and hopes the United States refrains from politicizing the currency issue, a Chinese Foreign Ministry spokesperson said yesterday.
In a semi-annual currency report issued on Wednesday, the US Treasury Department did not list China as a currency manipulator. But the report did say the US would continue to monitor and review China’s currency practices.
The report’s conclusion that China does not manipulate the exchange rate is in line with common sense and the consensus of the international community, spokesperson Lu Kang told a routine press briefing.
As a responsible major country, China has repeatedly reiterated that it will not engage in competitive currency devaluation and will not use the exchange rate of the yuan as a tool to deal with external disturbances such as trade disputes, Lu added.
“China will unswervingly deepen the reform of exchange rate marketization and continue to improve the managed floating exchange rate system, which is market-oriented and formulated in reference to a basket of currencies,” Lu said.
China hopes the US can respect the law of the market and stay objective, rather than politicize the exchange rate issue, said the spokesperson.
The US Treasury Department concluded that no major trading partner of the United States met the standard of currency manipulation during the four quarters ending June 2018.
However, it put China, Germany, India, Japan, South Korea and Switzerland on its “monitoring list,” which means their foreign exchange policies bear close monitoring.
The Treasury Department said it places “significant importance” on China adhering to its commitments to refrain from engaging in competitive devaluation, while expressing its concern about the depreciation of the Chinese currency yuan. “China could pursue more market-based economic reforms that would bolster confidence in the yuan,” said the department.
Yi Gang, governor of the People’s Bank of China, said last week that China will continue to let the market “play a decisive role” in the formation of the yuan exchange rate.
“We will not engage in competitive devaluation, and will not use the exchange rate as a tool to deal with trade frictions,” Yi told a meeting of the International Monetary and Financial Committee.
Markus Rodlauer, deputy director of the Asia and Pacific Department at the International Monetary Fund, believed that the yuan exchange rate is “broadly in line” with China’s economic fundamentals.
“According to our framework, the exchange rate of the yuan is not out of line. It is broadly in line with the fundamentals,” Rodlauer told Bloomberg News last week.
Economists said it’s no surprise that other currencies would depreciate against the US dollar as the United States engages in fiscal stimulus and tightens its monetary policy.
“Fiscal expansions and monetary contractions strengthen currencies,” said Jason Furman, a professor at the Harvard Kennedy School and former chairman of the White House Council of Economic Advisers, adding America’s currency has strengthened by an average of more than 7 percent against those of its trading partners since April.
“It’s worth noting that there are no direct signs of such manipulation,” Furman argued, as “US policy and shifting economic fundamentals” have weakened the yuan against the dollar.