US trade deficit with China must be addressed rationally, says Chinese central bank chief

Yi Gang’s comments in a magazine interview comew after both countries held high-level talks in Beijing last week to avert a trade war

PUBLISHED : Monday, 07 May, 2018, 11:14am
UPDATED : Monday, 07 May, 2018, 11:07pm

China’s “huge” trade imbalance with the United States is a structural and long-term problem and should be viewed with rationality, the Chinese central bank governor was quoted as saying by financial magazine Caixin.

Yi Gang, appointed to head the People’s Bank of China in March, also called for concerted efforts from the United States and China to resolve the trade dispute, Caixin said in a report published late on Friday.

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The comments came after an inconclusive two-day meeting between Chinese and US top-level officials in Beijing amid escalating tit-for-tat tariff threats between the world’s two biggest economies. Washington demanded that China reduce its trade surplus with the United States by at least US$200 billion by the end of 2020, according to sources.

China had a record US goods trade surplus of US$375 billion in 2017.

China’s opening up would not be affected by the current trade frictions with the United States, Yi said.

Yi only weighed in briefly on the US-China trade issue in an extensive interview with Caixin in Washington in late April. The central bank governor reiterated China’s stand on various of matters including monetary policy, the opening up of its economy, the yuan and the country’s deleveraging efforts.

He repeated China’s commitment to its prudent and neutral monetary policy and its focus on stabilising its macro leverage ratio and reducing financial risks. On the currency front, Yi said the central bank had not intervened in the foreign exchange market for almost a year and the authorities were committed to market-based foreign exchange rate reform.

China would also push for the convertibility of the capital account to coincide with the opening up of the financial sector, Yi said. Beijing in recent weeks said it would resume two key outbound investment schemes, allowing domestic financial institutions to invest in overseas securities.

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However, in the process of opening up, China would step up the oversight of cross-border capital flows, prevent the contagion of cross-border financial risks and fend off international arbitrage, Yi said.

In it deleveraging campaign, China would take aim at debt levels of local governments and state-owned firms, Yi added.