China seeks to reassure trading partners ahead of G20 by ruling out devaluation of yuan
Chinese policymakers on Thursday ruled out an imminent devaluation of the yuan as they seek to reassure trading partners ahead of the G20 summit that they can manage market stability while driving structural reforms.
Comments from senior economic policy officials and industry leaders come as finance ministers and central bankers from G20 nations prepare to meet in Shanghai on Friday and Saturday. Current market turmoil and a global economic slowdown are expected to be key topics of discussion.
Overhanging the summit are wider criticisms from the global economic and investment community about China’s record on managing its currency and markets and effectively communicating policies to financial markets.
Earlier on Thursday, the official China Daily newspaper reported, quoting finance minister Lou Jiwei, that a proposal to devalue China’s yuan, also known as the renminbi, was not on the agenda for G20 summit.
Zhu Guangyao, vice finance minister, said that China would seek to keep the exchange rate stable while maintaining its current “managed float” regime. China’s current foreign exchange management theoretically allows market forces input into the way the yuan is priced against other currencies.
“We do recognize the risk the global economy faces,” he said in English at a conference held by the Institute of International Finance linked to the G20 summit.
“We also understand how important it is to correctly communicate with the market,” he added.
A more than 6 percent drop in China stocks on Thursday, their biggest one-day loss in a month, highlighted the volatility that has roiled the country’s financial markets over the past nine months.
Key global policymakers have been blunt in their assessment of China’s ability to manage its domestic markets.
“You have to communicate clearly publicly or it will be interpreted for you,” U.S. Treasury Secretary Jack Lew said in an interview with the Wall Street Journal on Thursday.
Lew said China must also make it clear that there is no “major devaluation” in the pipeline.
The People’s Bank of China (PBOC) devalued its currency in August, arguing it would allow the market to reset at its natural level. But investors have continued to move out of the currency since and the exchange rate has slid further.
