No worries over China's ability to defend yuan

China's yuan currency has faced strong selling pressure this year, losing more than 8 per cent between March and August at the height of market worries.
China's yuan currency has faced strong selling pressure this year, losing more than 8 per cent between March and August at the height of market worries.PHOTO: AFP

NUSA DUA (Bali) • International Monetary Fund chief economist Maurice Obstfeld said yesterday that he was not concerned about the Chinese government's ability to defend its currency despite the recent depreciation of the yuan.

"No, I don't think it is a problem," Dr Obstfeld said when asked about the issue on the sidelines of a news conference at the IMF and World Bank annual meetings in Bali.

But Dr Obstfeld also told the news conference that Beijing would face a "balancing act" between actions to shore up growth and ensure financial stability.

China's yuan currency has faced strong selling pressure this year, losing more than 8 per cent between March and August at the height of market worries, though it has since pared losses as the authorities stepped up support.

Yesterday, China's central bank fixed the yuan's official mid-point for trading at 6.9019 per dollar, edging close to the psychologically important 7.0 barrier and helping to send Asian stocks to a 17-month low.

Dr Obstfeld said financial markets have overly emphasised short-term movements in China's currency, adding that the yuan has often recovered quickly from periods of volatility in recent years.

A United States Treasury official on Monday repeated that the Trump administration was concerned about the yuan's recent weakening as the department prepares a semi-annual report on currency manipulation due out next week.

 
 

Asked about the US Treasury official's comments, Chinese Foreign Ministry spokesman Lu Kang said: "We have no intention of promoting exports through the competitive devaluation of our currency, and will not use the renminbi (yuan) exchange rate as a tool to respond to disputes in trade or other areas."

Such remarks were "groundless speculation" and irresponsible, Mr Lu told a daily briefing in Beijing.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 10, 2018, with the headline 'No worries over China's ability to defend yuan'. Print Edition | Subscribe