Make way, not war

China's foreign-exchange regulator urged Group of 20 nations to improve collaboration to avoid any so-called currency wars while signalling he is comfortable with the value of the yuan.

On a global level, there needs to be "better communication and co-ordination" on foreign exchange among the G20, Yi Gang, who is also a deputy governor of China's central bank, said at the World Economic Forum's annual meeting in Davos, Switzerland on the weekend.

"Right now, it is pretty much close to the equilibrium level," he said, referring to the Chinese currency's exchange rate.

Japanese Economy Minister Akira Amari said his nation aimed to defeat deflation rather than weaken the yen, after Prime Minister Shinzo Abe's push for laxer monetary policy sparked a slide in the currency. His comments on Saturday followed a week in which German and Canadian policymakers joined a worldwide chorus highlighting a recent plunge in the yen as a worry.

"A currency war, a series of tit-for-tat competitive devaluations, would trigger trade protection measures that would damage global trade and therefore growth globally," said Louis Kuijs, the chief China economist at Royal Bank of Scotland in Hong Kong who previously worked for the World Bank. "That would not be good for any country with a stake in the global economy."

The yuan was still "somewhat below 'fair value'", Kuijs wrote in a note on Friday. He estimated that its nominal effective exchange rate, the relative value of the yuan compared with other major currencies, appreciated 2.5 per cent between the end of September and January 23.

Criticism over China's exchange-rate system has abated in recent months. Lawrence Summers, the former top economic adviser to US President Barack Obama, said earlier this month that the yuan was no longer as undervalued as it was five years ago. The currency, which has strengthened about 17 per cent against the dollar since the end of 2007, rose 1 per cent last year, the least in three years.