Top official denies pact between China, US to revive currencies
Print Edition
CHINA’S vice finance minister denied yesterday that there was an agreement between China and the United States over the recent weakening of the greenback.
The minister commented after the US central bank decided to keep the interest rates unchanged over a longer term, fueling speculation that there was a tacit understanding — likely reached at the recent G20 meeting in Shanghai — to relieve pressure on currencies.
“I can say there is no secret agreement between the US and China over the adjustment of exchange rates,” Vice Minister of Finance Zhu Guangyao said yesterday.
He added that China had the tools to keep the domestic economy in the right direction, and that the recent nervous sentiment in the financial market did not reflect the economic fundamentals.
After the G20 meeting of finance ministers and central bank governors in Shanghai last month, the Chinese, European, Japanese and the US central banks have announced monetary easing measures.
The US dollar fell to a five-month low against major currencies last week after the US Federal comment.
The yuan has strengthened to 6.49 per US dollar in recent weeks from 6.54 at the beginning of March.
Goldman Sachs, in a note released on Monday, said the institution sees no conspiracy to stabilize exchange rates among various countries as the G20 communique already reflected the US Federal Reserve’s concerns over monetary tightening in advanced countries.
Zhu cited the central bank Vice Governor Yi Gang as saying that the declining foreign exchange reserve in China was due to increased holding of foreign currencies by the Chinese residents.
The foreign exchange regulator also said yesterday that China’s cross-border capital outflow pressure had eased significantly in recent months.
China’s foreign exchange reserves fell US$28.6 billion in February, down from the decreases of US$107.9 billion in December and US$99.5 billion in January, said Wang Yungui, from the State Administration of Foreign Exchange.
Cross-border capital outflow was down 45 percent in February month on month. Depreciation pressure on the yuan has largely been removed and its value has also gradually stabilized. This shows that cross-border capital outflow from China has moderated, Wang said.
Wang Chunying, another SAFE official, said: “Cross-border capital movement is expected to stabilize some time in the future.”
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