PBOC deputy governor – China will not lower value of yuan to spur exports

Chinese Yuan

According to a deputy governor of the People’s Bank of China (PBOC), China will not reduce the value of its currency to stimulate exports.

"China will definitely not devalue the yuan to stimulate exports, it will definitely not engage in a currency war. This is because China is a responsible major economy," Yi Gang said to China’s Economic Daily newspaper on Friday.

Compared to the last year, China’s exports for January and February combined went up 4.0 percent, while imports increased by 26.4 percent, hinting at a solid improvement in demand domestically and abroad.

But the export outlook for China and other economists who rely on trades is being blurred by fears in increasing protectionism by the United States.

“Grand champions” of currency manipulation, is what U.S. President Donald Trump called china in an interview with Reuters a month ago.

The U.S. Treasury said in its last currency report in October that none of the major trading partners of the U.S. was manipulating its currency to gain advantage for its exports.

Yi Gang said on Monday that China will keep to its managed floating exchange rate framework to keep the yuan stable.

Despite the repeated interventions by authorities which have been chewing through the country’s foreign exchange reserves, the Chinese currency dropped 6.5 percent against the dollar last year.

As the dollar’s rally weakened early in 2017, the yuan finally had room to breathe but has come under a new downward pressure in recent sessions on growing expectations the U.S. Federal Reserve will raise interest rates next week.

Most traders expect the yuan to slide down by about 5 percent this year if U.S. interest rates do rise and support the dollar.

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