US Treasury chief welcomes Beijing’s use of various tools to boost economic growth
Jack Lew acknowledges Hong Kong’s role in connecting mainland with world
US Treasury Secretary Jack Lew has welcomed Beijing’s use of a wide range of tools to boost economic growth and avoid a currency war, while also tipping his hat to Hong Kong’s role in connecting mainland China with the world.
His remarks came a day after Beijing cut mainland banks’ reserve requirement ratio (RRR) on Monday to encourage bank lending in a bid to boost the economy and announced job cuts in the steel sector to curb oversupply.
Speaking to the media at the US consulate in Hong Kong, Lew said his recent visit to Beijing and Shanghai had been a success.
“Globally, each of us need to do what we can to create more demand, more growth in our own country,” he said. “This is because the global economy cannot rely on the US as the consumer of last resort.”
Lew said that during the G20 meeting in Shanghai last week, China had joined other countries in committing to use all types of tools, including fiscal policy, structural reform and monetary policy, to boost growth and reduce excess supply in certain industries.
The People’s Bank of China surprise the market on Monday with a 50-basis-point cut to RRR to encourage banks to lend more money. The first such cut since October followed remarks by central bank governor Zhou Xiaochuan in Shanghai last week that China would lean towards monetary easing to support growth.
Lew also welcomed Beijing officials confirmation “there is no intention and no need to devalue the yuan”, and that China had joined other G20 countries in pledging to enhance communication in their currency policies.
“The commitment is that there won’t be a country act in a way that would lead to competitive devaluation,” he said. “The risk for a currency war is greatly, greatly reduced.”
PBOC devalued the yuan by 2 per cent against the US dollar in a one-off move in August and the currency fell 5.6 per cent against the greenback last year. It fell a further 2 per cent in the first week of this year but PBOC intervention has seen it bounce back to appreciate 0.37 per cent against the US dollar this year.
Lew said it was important for China to move towards a market-oriented exchange rate and to enhance communication of its exchange rate policies to keep the currency trade functioning in an orderly manner.
He also highlighted Hong Kong’s role in the mainland’s economic reforms.
“Both the US and China are responsible for an influence in the global economy,” Lew said. “It is clear how important Hong Kong is in playing a role in connecting China and the US and the world.”
The stock market welcomed the RRR cut, with the Shanghai Composite Index rising 1.7 per cent on Tuesday to close at 2,733.17, rebounding from a 2.9 per cent loss on Monday. Hong Kong’s benchmark Hang Seng Index rose 1.6 per cent on Tuesday to close at 19,407.46.
Offshore yuan bounced back to trade at 6.5471 per US dollar on Tuesday afternoon, stronger by 0.06 per cent than Monday when it fell to three-week low of 6.5556 after the RRR cut announcement.