China central bank official says yuan at right level, disorderly capital flows unlikely

Tuesday,   13-Aug-2019   03:54 PM (IST)

China’s yuan is at an appropriate level currently and two-way fluctuations in the currency will not necessarily cause disorderly capital flows, a senior official at the People’s Bank of China told Reuters on Tuesday. The yuan has weakened nearly 2.4% since U.S. President Donald Trump threatened earlier this month to impose more tariffs on Chinese goods from Sept. 1, though there are signs China is trying to stem the declines. “The current level of RMB exchange rate is appropriately aligned with fundamentals of China’s economy and market supply and demand,” Zhu Jun, head of the central bank’s international department, said in an interview with Reuters. She said China was “shocked” by the U.S. Treasury Department’s move last week to label China a currency manipulator, hours after Beijing let the yuan drop through a key support level to its lowest point in more than a decade. But Zhu asserted that China will be able to “navigate all scenarios” arising from Washington’s currency-manipulator label. In the short run, external shocks will also play a role by influencing the yuan’s movements, she said. That said, as long as RMB moves in an orderly manner based on market supply and demand, such movements in either direction do not necessarily mean disorderly movement of capital flow,” Zhu said. The yuan is also known as renminbi, or RMB. The yuan will be supported by China’s solid economic fundamentals, a stable debt ratio, contained financial risks, adequate foreign exchange reserves, and favourable interest rate spreads between China and major advanced economies, she said. “Over the medium and long term, we have full confidence in RMB as a strong currency,” Zhu said.