China would “never” launch a currency war to devalue the yuan to boost exports, a senior Chinese central bank official said on Saturday, cementing Beijing’s vow to keep a stable yuan. Yi Gang, vice-governor of the People’s Bank of China (PBOC), made the comments to mainland media on the sidelines of the Chinese People’s Political Consultative Conference in Beijing on Saturday. “We will never devalue [the yuan] to promote exports, will never stage a currency war, as China is a responsible country. Our overall direction is to keep exchange rate basically stable within a reasonable range,” Yi said. He also said in the morning that there was no need at present for the PBOC to follow the US Federal Reserve in tightening monetary policy by raising interest rates. China’s leaders still banking on ‘irreplaceable’ central bank chief Any decision on interest rates would take into account such domestic factors as economic growth and prices, he added. “I think we should continue to observe [our economic performance],” he told the China Business News. Expectations of a second rate hike by the Federal Reserve later this month have risen in recent weeks after Fed chair Janet Yellen said in mid-February that it was unwise to wait too long to raise interest rates. On Friday, Yellen said that a rise at the Fed’s next meeting on March 14 and 15 may be “appropriate”. The paces of the Fed’s rate rise could cloud the outlook of the yuan’s exchange rate and capital outflows. Zhang Yu, an analyst at Minsheng Securities, said the yuan would face depreciation pressure, expecting it to fluctuate in a range of 6.8-7.2 against the dollar. Fed chief Yellen says March rate hike by US may be ‘appropriate’ China’s economy is expected to have seen a good start to the year and the PBOC has raised interest rates of key tools it routinely uses to tighten market liquidity, fueling expectations that monetary policy is tightening. But so far it has refrained from adjusting benchmark interest rates or banks’ deposit reserve ratios due to its caution against sending strong signals on policy shifts that might disturb the yuan and capital flows. The PBOC is also alert to domestic financial risks. Yi said market liquidity was normal and stable despite the continuing capital outflow. He denied it was necessary to cut banks’ deposit reserve ratios, which might unlock funds into the interbank market. The central bank must keep monetary policy on an even keel – “not loose and not tight”, he added. Be afraid, be very afraid as US readies to raise interest rates Such a stance would maintain sound economic growth and prevent inflation and an asset bubble, he said, adding that the 2-3 per cent rise of the Consumer Price Index was regarded as a “golden range” and central banks around the world set their CPI targets at around 2 per cent. “China’s CPI [target] this year will be close to the golden range,” Yi said. He also said effective measures should be taken to ward off various risks and retire overcapacity.