Zhou Xiaochuan underscores Beijing’s ongoing commitment to keeping currency’s value steady.
The value of the yuan would remain stable against a basket of currencies, central bank chief Zhou Xiaochuan said on Sunday on the sidelines of the G20 meeting of finance ministers and central bankers in Chengdu.
Speaking to the South China Morning Post, Zhou, the longest-serving central bank chief among those of the Group of 20 nations, said currency stability was the key message on China’s yuan policy.
He also underscored Beijing’s commitment to “a managed floating exchange rate” system, in an apparent move to defy one-way betting on the yuan’s future movement.
Japanese Finance Minister Taro Aso said on Saturday he was closely watching China’s economy and the decline in the value of the yuan, Reuters reported. Aso said he agreed with US Treasury Secretary Jack Lew about the need for structural reform in China and transparency on the yuan.
Zhou’s comments came before the world’s major economic policymakers again pledged to stay away from “competitive currency devaluations” as part of a global coordinated response to weak economic growth and financial market turmoil.
“We are sticking with a managed floating exchange rate system, and that’s a policy stance we have been reiterating for years,” Zhou said, when asked outside the meetings if the yuan would keep depreciating.
Asked if the value of the yuan would be kept stable against a basket of currencies, Zhou said: “In my view, that’s the line for all people to understand [about China’s yuan policy].”
The governor the People’s Bank of China also attended a Financial Stability Board meeting and held closed-door talks with Lew and Philip Hammond, Britain’s new chancellor of the exchequer.
The world’s major financial officials met in the Sichuan capital for two days of talks to address weakness in global growth and uncertainties stemming from Britain’s vote to leave the European Union.
Zhou did not give any public speeches or hold any press conferences over the two days.
The commitment of the central bank to a stable yuan against a basket of currencies was tested early last week amid an apparent weakening of the yuan against the US dollar and a group of other currencies. But the yuan’s exchange rate quickly strengthened on Thursday and Friday.
“The yuan had been kept stable against a basket of currencies for quite a long time, but recently it had weakened, so there might be some early suspicion in the international community,” Ding Shuang, chief China economist at Standard Chartered in Hong Kong, said ahead of the talks.
“The central bank prefers stability … It increased intervention in the days before the G20 meeting in Chengdu.”
Zhou Hao, an economist at Commerzbank in Singapore, said: “China’s central bank won’t give up the 6.7 [dollar/yuan exchange rate] level very easily. It would be quite risky if the level was given up easily – if the yuan weakens to 6.8 against the dollar, it would overthrow many previous beliefs.”
Zhao Yang, chief China economist at Nomura in Hong Kong, said there would be depreciation pressures on the yuan against the US dollar in the long term. “But it’s another matter whether the yuan will depreciate against a basket of currencies – the euro and yen are quite uncertain,” Zhao said.
Downward pressure on the yuan would come from China’s economic slowdown and capital outflow pressures over the next two or three years, Zhao said.
“The central bank has done a quite good job during the past half year as it has been allowing yuan depreciation in a managed and controllable way,” Zhao said.
“There’s no panic, and there’s an agreed bottom line now that there won’t be any one-off yuan revaluation.”
By Wendy Wu & Zhou Xin