The mainland's central bank yesterday tried frantically to defuse controversy over reported comments by one of its senior officials who said pressure on Beijing to devalue the yuan would increase in the second half of the year. Yi Gang, deputy secretary general of the bank's Monetary Policy Committee, was the centre of attention after his comments were interpreted by the media as official confirmation the yuan would be devalued later this year. Brokers said the report had a short-term negative impact on Hong Kong's stock market which fell sharply in early trade yesterday before the situation was clarified. Other regional markets also reacted as news of Mr Yi's reported comments spread. Financial professionals said the controversy reflected international nervousness over the stability of the mainland's currency - intensified by the Indonesian situation. 'People are clearly worried about this stuff coming out about the renminbi,' said Indosuez W.I. Carr chief economist Michael Taylor. 'The report was wrong - the guy was misquoted - but that's the stage of the cycle we're at. People are prepared to believe anything.' Mr Yi was quoted in Australia as saying in an academic paper that 'pressure for devaluation [of the yuan] will increase in the second half of 1998 due to the impact of the financial crisis on China's exports'. Mr Yi, who did not attend the seminar in Australia where the paper was delivered last week and reported yesterday, denied he co-wrote the paper although he said the author, Song Li-Gang from the Australian National University, used a number of his views in writing the paper. A bank spokesman said his office and other departments had been swamped by phone calls yesterday. 'Our stance is clear and steadfast. The yuan will remain stable in the future,' he said. Mr Yi - who said he agreed with the points Mr Song raised about Beijing's worries over the Asian financial crisis - stressed he remained confident the country would hold firm on the stability of the yuan. 'My view has always been that we are fully able to maintain the stability of the yuan,' he was quoted as saying. 'Actually, the yuan has been appreciating slightly recently.' Beijing has repeatedly said it would not devalue the currency, partly to help the region recover from the financial turmoil that has swept the region since the middle of last year.