China has ‘no plan’ to devalue yuan to help exports – or start a trade war, Premier Li Keqiang tells IMF
The Chinese government has no intention of devaluing its currency to help the export sector and has no plan to start a “trade war”, Premier Li Keqiang (李克強) told the International Monetary Fund managing director Christine Lagarde yesterday.
Li reiterated the official stance that the yuan had no basis to depreciate continuously, according to a statement on the Chinese government website summarising the call.
The phone conversation between Li and Lagarde was requested by the IMF and it came days after the IMF chief said publicly at the World Economic Forum in Davos, Switzerland, that China should improve communication with the market over its currency policy.
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While China has said the long-term goal of the yuan regime is to follow a basket of currencies instead of the dollar, the central bank has also intervened heavily in the market to stabilise the yuan rate against the dollar, keeping investors around the world guessing at Beijing’s true intentions.
In the onshore yuan market, the central bank set the midpoint rate slightly firmer for the fifth consecutive day yesterday.
Li now finds himself at the forefront of a public relations war to shore up confidence in the yuan and the Chinese economy as a whole, as the country’s state media engages in a war of words with billionaire investor George Soros following his comments that a hard-landing in the world’s second biggest economy was “unavoidable”.
“In fact, the yuan exchange rate has maintained basic stability against a basket of currencies, and there’s no basis for any continuous depreciation,” Li said.
At the same time, China would “enhance communication with the market” to “keep the yuan exchange rate basically stable at a reasonable and balanced level” – a line Beijing has used to describe its currency policy for a decade.
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Li also told Lagarde that China was willing to talk more to international agencies like the IMF about its economic policies and to work with other governments to “release positive signals about world economic recovery and growth to boost market confidence”.
Li listed China economic achievements to Lagarde, including “relatively full employment, stronger-than-GDP income and savings growth, and an improved environment”.
“We are capable of keeping sustained and steady growth in the Chinese economy,” Li said.
The call came hours after the IMF’s long-awaited quota reform came into effective, giving emerging markets like China and India a bigger say in the international agency.
China will have the third largest IMF quota and voting share, after the United States and Japan, IMF data showed. It is another mark of China’s growing influence at the IMF after the agency’s decision to include the yuan in its Special Drawing Rights basket last year, giving the yuan a nominal international reserve currency status.
