China central bank chief: no basis for persistent yuan falls

Friday February 26 2016

President of the People’s Republic of China Xi

President of the People’s Republic of China Xi Jinping attends the BRICS summit in Durban on March 27, 2013. AFP PHOTO / ALEXANDER JOE 

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There is no reason for China's yuan currency to keep falling, the governor of the central bank of the world's second-largest economy said Friday.

"There is no basis for persistent renminbi depreciation from the perspective of fundamentals," Zhou Xiaochuan, head of the People's Bank of China, told a conference in Shanghai ahead of a G20 finance ministers meeting, using another name for the unit.

Beijing's Communist authorities keep a tight rein on the currency, only allowing it to rise or fall by two percent on either side of a daily fix set by the central bank.

In January, Beijing guided the unit down 1.4 percent by setting the rate lower for eight consecutive sessions — a move that raised worries of a creeping devaluation.

China adjusted the yuan down nearly five percent over a week in mid-August, spurring fears it was pursuing a currency war to help boost its flagging exports.

Capital has been flowing out of China due to worries about the flagging growth, causing the currency to weaken — which in turn drives withdrawals.
The Chinese economy grew 6.9 percent in 2015, the slowest rate since 1990.

But Zhou told a conference organised by the Institute of International Finance: "The fundamentals of China's economy remain strong.

"China still has some monetary policy space and monetary policy tools to address potential downside risk," he added, saying that Beijing "will maintain prudent financial policy in a flexible and appropriate way".