(Adds comments by policy adviser)
BEIJING, March 6 China will stick to its managed
floating exchange rate framework to keep the yuan currency
basically stable, a deputy governor of the People's Bank of
China (PBOC) said on Monday.
The central bank spent billions of dollars last year to slow
the yuan's decline against a resurgent dollar. Not helping the
currency's cause, a slowdown in the economy spurred investors to
move their funds elsewhere, prompting the authorities to
implement a series of measures to curb the outflow.
"We will maintain the framework of a managed float, which is
based on supply and demand and the yuan's value against a basket
of currencies," PBOC Deputy Governor Yi Gang told reporters on
the sidelines of the annual meeting of parliament in Beijing.
While market forces play a decisive role, the yuan is a
managed floating exchange rate, and in the process, China has
kept the yuan basically stable at a reasonable and balanced
level, Yi said.
The yuan shed about 6.5 percent of its value
against the dollar last year. It then strengthened in early
January and had been trading in a flat range, although its
breach of the 6.9 per dollar level on Friday rekindled some
depreciation expectations and triggered some corporate dollar
buying on Monday morning.
"I cannot say the (yuan) depreciation will be bigger than
last year, but I can say its fluctuations will be bigger this
year than last year," said a policy adviser, who spoke on
condition of anonymity.
Some analysts also said a subtle change in the language used
to describe the yuan in Premier Li Keqiang's annual work report
on Sunday had sparked some speculation that policymakers were
now less willing to defend the Chinese currency.
A pledge to "keep the yuan stable at an appropriate and
balanced level" seen in previous years' reports was missing.
Instead Li said: "The RMB (yuan) exchange rate will be
further liberalised, and the currency's stable position in the
global monetary system will be maintained."
The exchange rate has been a bugbear for U.S. President
Donald Trump, who declared China the "grand champions" of
currency manipulation in an interview with Reuters last month.
During his presidential campaign, Trump often accused China
of keeping its currency artificially low against the dollar to
make Chinese exports cheaper, "stealing" American manufacturing
In a commentary afterwards, the official Xinhua news agency
said criticising China for manipulating its currency to prop up
trade was a "major myth that has been circulating in Washington
for quite a long time".
On Monday, the yuan firmed a tad as the dollar fell on
profit-taking after Federal Reserve Chair Janet Yellen confirmed
on Friday that the Fed was set to raise rates later this month.
Yi, asked whether China would raise interest rates this
year, said the central bank would need to consider the health of
the economy in any decision.
(Reporting by Kevin Yao; Writing by Ryan Woo and John Ruwitch;
Editing by Simon Cameron-Moore and Hugh Lawson)