Beijing vows to keep yuan stable, not use it as weapon in a trade war

The yuan on Jan 14 rose to its highest level in more than five months on news of the US Treasury's climbdown.
The yuan on Jan 14 rose to its highest level in more than five months on news of the US Treasury's climbdown.PHOTO: REUTERS

China denied yesterday that it was ever a currency manipulator and pledged not to engage in competitive devaluation, but to keep the yuan stable.

Beijing also committed to more reforms and vowed not to use its currency as a weapon in a trade war.

The United States Treasury Department rolled back on its designation of China as a currency cheat on Monday, just ahead of a scheduled signing of a trade deal between the two world economic powers on Thursday morning.

Although the latest US move was largely seen as symbolic, China welcomed it, saying it was "in line with the facts and the consensus of the international community".

Foreign Ministry spokesman Geng Shuang described China as "a responsible big country", citing a recent International Monetary Fund review that concluded that the yuan's value in 2018 was neither significantly over-valued nor undervalued.

"We have repeatedly stressed that we will not engage in competitive currency devaluation, and will not use currency as a tool to deal with external disturbances such as trade disputes," said Mr Geng.

The Trump administration declared China a currency manipulator last August after the Chinese central bank allowed the yuan to slide below the symbolic threshold of seven to the US dollar, causing ripples across financial markets.

At that point, the two economic superpowers had been locked in a bruising trade war for more than a year.

The last time the US labelled Beijing a currency cheat was between 1992 and 1994.

 
 

Yesterday, the yuan rose to its highest level in more than five months on news of the US Treasury's climbdown.

The offshore yuan strengthened to as much as 6.8673 to the dollar before ebbing in the afternoon in Asia, while the onshore yuan ended domestic trading at 6.8854 to the dollar.

The yuan's rally ahead of the deal signing indicates the potential for trade relations to improve, noted analyst Stephen Innes, the chief Asia market strategist at AxiTraders.

"The US reversing its decision to brand China a currency manipulator is a most precise and most definitive de-escalation of trade tension to date and provides a less congested road as we pivot to phase two of the broader trade agreement," he said.

 
A version of this article appeared in the print edition of The Straits Times on January 15, 2020, with the headline 'Beijing vows to keep yuan stable, not use it as weapon in a trade war'. Print Edition | Subscribe