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.