‘The central bank is neither god nor a magician ...’ China’s central bank chief Zhou Xiaochuan breaks silence over the yuan
There’s no basis for continued depreciation of the currency, says the governor of the People’s Bank of China
After months of silence, China’s central bank chief, has finally broken his silence over Beijing’s currency policy and assured the public there is no basis for the yuan’s continued depreciation.
Zhou Xiaochuan, governor of the People’s Bank of China (PBOC), also rejected rumours it would tighten capital controls.
In an interview published by mainland financial magazine, Caixin, two days before the mainland’s financial markets reopen on Monday, Zhou addressed concerns over China’s dwindling foreign reserves, which last month fell to the lowest levels since 2012.
“It is normal for foreign reserves to rise and fall as long as the fundamentals face no problems,” Zhou said in his first public comments on the bank’s rationale and strategies, in the face of multiple challenges since it devalued the renminbi by 2 per cent in August.
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The PBOC has pumped in money to stabilise the yuan because of pressure following the economic slowdown and continued capital outflow, which has depleted China’s foreign reserves. Holdings fell by US$99.5 billion in January to US$3.23 trillion.
“The central bank is neither god nor a magician who can turn uncertainties to certainties ... sometimes, the central bank has to say, ‘Sorry, we have to wait for new data’.”
Zhou said China had no intention of tightening capital controls as it would be hard to implement, given the size of China’s international trade and businesses abroad. The level of capital outflow in recent months was normal.