China rules out competitive currency devaluations

BEIJING: China has no intention and no need to carry out competitive currency devaluations, the head of the country’s foreign exchange regulator said.

In a weekend piece in the Chinese magazine Modern Bankers, Pan Gongsheng said the People’s Bank of China’s (PBoC) supplying of liquidity to the market was to prevent excessive fluctuations in the exchange rate and prevent a “herd effect,” to maintain market stability.

“China has no intention of raising competitiveness via currency devaluation. It does not have this wish, and it also does not have this need,” Pan, who runs China’s State Administration of Foreign Exchange (SAFE), wrote.

China was working hard to raise the exchange rate’s flexibility and to maintain its stability, he added.

This was good for the international community and would avoid negative spillover effects from a disorderly exchange rate adjustment or competitive devaluations by other currencies, Pan wrote.

Pan is also a vice governor of the PBoC.

China’s yuan is up just around 0.6 percent so far this year, having lost nearly 7 percent in 2016. In November, the yuan hit an eight-year low following Donald Trump’s shock election as US president.

In a Reuters poll last week, the yuan was forecast to weaken to 7.07 per dollar in a year.

Despite harsh rhetoric about China on the campaign trail, Trump has recently had warm words for his Chinese counterpart Xi Jinping, praising him for trying to rein in nucleararmed North Korea.

Trump has also backtracked on his pledges as a candidate to label China a “currency manipulator” and impose steep tariffs on Chinese imports.

Speaking at a forum on Sunday organized by Hong Kong-based Phoenix Television, Chinese Vice Finance Minister Zhu Guangyao said that trade disputes between China and the US should be resolved via “cooperative methods.”

China and the US need to strengthen fiscal and monetary policy coordination, he added, according to a report on the broadcaster’s website.

China will also pay close attention to Trump’s tax cut plan, Zhu said, without elaborating.

Last month, Trump unveiled a one-page plan proposing deep US tax cuts that would make the federal deficit balloon if enacted.